The Investment Case for Research In Motion as a 'Buy'

NEW YORK (TheStreet) -- With all the hoopla about Apple's outsized iPhone sales and monster earnings, you could be forgiven for missing the news about northern competitor Research In Motion. For months, RIM has been kicked and beaten in the media, and investors have watched their shares tumble 70% from a year ago. There is little question about how painful it has been to own RIM.

I have examined RIM's situation and written about it extensively. While I was bearish up until early March, my opinion shifted and I started a long position in RIM when the price first broke below $13 a share. I didn't buy the stock directly; rather, I was shorting put options to gain premium. A put option gives the buyer the right to sell me shares at a set price within a set period of time. Selling put options is usually more conservative than buying the underlying stock outright and, with RIM falling as fast as it was, I did not want to attempt to be a hero catching that falling knife.

My opinion in March, which has not shifted significantly, is that RIM is worth at least $12.50 dead even in a relatively quick-and-dirty liquidation of company assets. RIM is currently far from closing its doors and vanishing, so some value must be added back in for blue sky. The "some" is the trick question because even RIM has lowered intangibles' valuations to the point of reporting non-cash losses.

It may be easy to lose sight of the fact that RIM has value and, in the end, what we try to do as investors is pay less than what the value is. An investor buying Apple shares during the open after the last earnings report now has a better understanding that cost is what you pay, but value is what you get. Is Apple worth more than $615 a share? Quite possibly, but it was emotion driving the price up from $560 to $615 overnight. It may be difficult to get emotionally excited about RIM when you hear the iPhone has become the No. 1 smartphone in Canada (RIM is based in Ontario, Canada), pushing aside BlackBerry. RIM is not likely to regain the top spot until 2013 if OS 10 doesn't arrive in the fall and impress enough to justify the delays and wait.

RIM is performing quite well outside of North America even if the news isn't hitting the front pages. Many tend to focus on the North American market, and it's understandable. Consumer brands like the iPhone and Coach bags have recently reported strong earnings in Asia, in particular China. I believe the Asian Pacific markets are increasingly more important to RIM's future.