BlackBerry Ltd (NASDAQ:BBRY) reported its fiscal first quarter 2016 results today, and although the company reported a quarterly loss that was slightly higher than the analysts’ forecasts, the software business showed positive signs. Blackberry’s software and licensing revenue was $137 million for the quarter, a 150% increase compared to the same quarter of fiscal year 2015. There was a positive free cash flow of $123 million, and BlackBerry Ltd (NASDAQ:BBRY) also reported a cash and investments balance of $3.32 billion at the end of the quarter, which is a $50 million increase over the fourth quarter of fiscal year 2015. BlackBerry Ltd (NASDAQ:BBRY)’s total revenue for the first quarter of fiscal year 2016 was $658 million, with 21% of that revenue coming from its software and licensing business. During the fiscal quarter, BlackBerry Ltd (NASDAQ:BBRY) also acquired WatchDox, a famous company which provides secure file transfer solutions across iOS, Android, Windows, PC, and BlackBerry. The company also struck a cross-licensing deal with Cisco Systems Inc. (NASDAQ:CSCO), through which BlackBerry will get free licensing. BlackBerry Ltd (NASDAQ:BBRY) CEO John Chen said that he is pleased with the positive results from the software business of the Canadian company. He thinks that software and enterprise is the key to Blackberry’s future growth. The markets on the other hand have not been impressed with the quarterly results, with shares trading down by 2% this morning. The real and important question is whether you should buy Blackberry after the recent quarterly report? Let’s look to two important metrics to give us some idea as to whether BlackBerry is a good bet right now.
Tracking hedge funds’ positions in companies is of vital importance because hedge funds spend large amounts of resources, time, and money to decide their bets on companies. Our experts analyzed the historical stock picks of small-cap companies like BlackBerry by hedge funds and found out that the funds performed far better betting on these companies than they did on large-cap stocks, which is where most of their money is invested and why their performances as a whole has been poor for years. A portfolio of the 15 most popular small-cap stocks among funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012 in backtesting. The exceptional results of this strategy got even better in forward testing after the strategy went live at the end of August 2012, returning more than 142% and beating the market by more than 83 percentage points since then, and by 4.6 percentage points in the first quarter of this year (see more details).
We at Insider Monkey give great value to the activity of hedge funds and their changing positions in stocks while analyzing the overall strength of any company. 27 of the hedge funds we track at Insider Monkey held long positions in BlackBerry Ltd (NASDAQ:BBRY) by the end of the first quarter 2015, an increase from 25 hedge funds which held the stock three months earlier. The total value of hedge funds’ investment in Blackberry dropped however, to $633 million at the end of the first quarter from $756 million at the end of 2014, a drop of a little over 16%. However, shares of BlackBerry declined by 19% during the first quarter, showing that funds actually inched their share count up slightly during the quarter.
Insider transactions are another important metric we use to determine stock attractiveness, though in this case, there has been no insider activity recorded for BlackBerry Ltd (NASDAQ:BBRY) in 2015.
Let’s take a closer look at the hedge fund activity surrounding Blackberry now.
How have hedge funds been trading Blackberry (BBRY)?
According to hedge fund experts at Insider Monkey, Prem Watsa’s Fairfax Financial Holdings has the biggest position in BlackBerry Ltd (NASDAQ:BBRY), worth around $416.5 million, which comprises 29.3% of its total 13F portfolio. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke, and John Campbell, has the second biggest stake in BlackBerry, worth $56.3 million, which means 0.3% of its 13F portfolio is allocated to the stock. Jim Simons’ Renaissance Technologies, Kahn Brothers, and Nelson Obus’ Wynnefield Capital are some of the other notable hedge funds which are bullish on BlackBerry Ltd (NASDAQ:BBRY).
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BlackBerry Ltd (NASDAQ:BBRY) showed strong growth signs in software, though its mobile business is still tumbling. The company reported a quarterly loss which was slightly more than expectations. With insider sentiment neutral and hedge funds slightly bullish on the company, which is trading close to its 52-week low, we recommend a cautious buy of BlackBerry at this time, with the understanding that the turnaround is ongoing and will not occur overnight.
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