There are thousands of long-suffering BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) shareholders in Canada, and likely thousands more in the United States as well.
CEO John Chen and his management team have been laying the foundation for a turnaround for years now. The company cut staff, sold off non-core assets, and, most importantly, turned focus away from the hardware division in favour of software.
In September, management finally made it official. BlackBerry would no longer be making phones. Instead, it would partner with third-party manufacturers who would make devices with the BlackBerry name on them.
These are positive moves, yet the stock isn’t reacting. BlackBerry shares are down more than 10% in the last year and 40% in the past five years. The only shareholders sitting pretty right now are ones that bought during the 2012 and 2013 lows.
Naturally, investors are getting frustrated. I totally get that. I’ve been a BlackBerry shareholder for years now, and I’m beginning to think the long-awaited turnaround may never happen.
Although Canada doesn’t have nearly as many technology companies as the United States, there are still a few options out there for frustrated BlackBerry owners looking to make a switch. Here are three that will appeal to different types of investors.
The value choice
Yellow Media Ltd. (TSX:Y) has quietly gobbled up many of Canada’s top websites. Together, its portfolio of sites and apps attracts 438 million visits each year. That makes it one of Canada’s largest website owners.
Yes, the company still publishes the yellow pages, but that is becoming less and less important. Customer losses are slowing as businesses realize the importance of getting exposure through the company’s digital properties. In 2014 Yellow Media lost nearly 100,000 customers. In its most recent quarter it only lost 3,000.
Not only is Yellow Media solidly profitable — it earned $112 million in free cash flow in the last 12 months — shares also trade at an attractive valuation. The company has a market cap of less than $500 million, meaning it trades at a price-to-free cash flow ratio of less than five. You won’t find many stocks cheaper than that in today’s market.
The dividend payer
There aren’t many tech stocks that pay handsome dividends in Canada. Most are pouring any available earnings back into the business to fund growth.
But there is one notable exception, and that’s Computer Modelling Group Ltd. (TSX:CMG). Shares of the maker of software for the energy sector currently pay $0.10 per quarter, which is good enough for a 4.3% yield.
Business is down because of the slowdown in the energy sector, but the company’s rock-solid balance sheet should easily be enough to weather this storm. Dividend payments aren’t quite covered by cash flow, but the company has a debt-free balance sheet and more than $70 million in cash. That’s enough to cover the dividend for more than two years, even if the company doesn’t earn a nickel.
The growth story
Sometimes the simplest growth stories are the best ones. Even though everyone already knows about the major upcoming Internet of Things (IoT) revolution, Sierra Wireless, Inc. (TSX:SW)(NASDAQ:SWIR) remains an attractive way to play the trend.
Sierra Wireless is in all sorts of sectors, including utilities, construction, autos, transport, retail, government organizations, and even home security among dozens of others. Its software will end up connecting millions of smart devices to the internet.
Although Sierra hasn’t really been able to translate this potential into profit, long-term revenue growth has been outstanding. The top line in 2012 was less than US$400 million. It’s on pace to surpass US$600 million in 2016. Analysts are also projecting a healthy $1.07 per share profit for 2017.
The bottom line
Frustrated BlackBerry shareholders have options. They can choose a value stock that’s moving rapidly towards becoming a pure tech play (Yellow Media). Or they can go for Computer Modelling Group and its 4.3% yield. Finally, if investors desire growth, Sierra Wireless is well poised to capture a large portion of a massive potential market.
