Billionaire D.E. Shaw Bought $46 Million in BlackBerry Ltd. Stock; Should You Buy Too?

Hedge fund manager D.E. Shaw is betting big on BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY).

| More on:
The Motley Fool

You might not have ever heard of him, but everyone ‘in the know’ on Wall Street has heard of Dave E. Shaw.

Shaw is founder and Chief Scientist of D.E. Shaw & Co., L.P. Since its inception in 1988, Shaw has consistently posted double-digit returns for his investors, handily outpacing the S&P 500 over the same timeframe. Today, the hedge fund is one of the largest in the world with roughly $32 billion in assets under management.

Based on Shaw’s remarkable track record, I always pay attention to what stocks he’s buying. And right now, he’s making some interesting investments in the technology sector.

This could be bigger than 3D printing… the personal computer… even the iPhone

Shaw has been betting big on a new theme in Silicon Valley called the Internet of Things, or IoT: the connection of everyday objects from cars and refrigerators to the Internet. In recent quarters, he has been building positions in stocks like Sierra Wireless IncCisco Systems Inc, and CalAmp Corp. These technology infrastructure companies are great plays on the boom taking place in this emerging industry.

He has also just picked up a new position. In August, SEC filings revealed that Shaw nearly doubled the size of his stake in Canadian technology giant BlackBerry Ltd. (TSX: BB)(NASDAQ: BBRY). As of June, the billionaire investor owns 4.5 million shares of the company valued at around US$45.8 million.

The announcement might come as a surprise to most investors. BlackBerry is better known for its struggling handset business. Perhaps there’s some value to be salvaged from this operation, but the company is unlikely to last long against giants like Apple Inc. and Google Inc.

However, this is a dated view of the company. Under the leadership of new Chief Executive John Chen, BlackBerry is once again on solid financial footing. Now he has declared the IoT as the new strategic focus for the company.

In May, BlackBerry announced Project Ion. According to the company, the initiative consists of three parts: supporting an IoT environment, creating a secure platform to run QNX, and partnering with other top players in this emerging segment.

To put it simply, BlackBerry wants to be the veins in the larger IoT circulatory system. Rather than building the interface consumers interact with, the company is building the infrastructure for all of these devices to talk to one another.

And the opportunity here could be huge. Today, more than 99% of all things in the physical world remain unconnected. But that’s about to change. Soon, just about everything you use — including your appliances, television, and thermostat — will be connected to the Internet.

As Mr. Chen wrote in a January blog post, “while there are 5 billion handsets in the world that we want to connect to, there may be 500 billion devices out there that present a tremendous opportunity for an organization with the experience and track record of QNX.”

According to Cisco CEO John Chambers, the number of devices connected to the Internet is projected to hit 50 billion within the next five years, a five-fold increase over the number of devices connected today. He estimates that the Internet of Things could be a US$19 trillion market by 2020. That’s larger than the market capitalization of every company in the S&P 500 combined.

How to stake your claim in the second Internet gold rush

BlackBerry is well positioned to lead this new industry. No other company has a better reputation for security. The firm’s QNX operating system is already found in millions of vehicle infotainment systems.

Judging by Mr. Shaw’s positions, he’s definitely optimistic on the IoT’s potential. Even if the market is only half as big as Chambers is predicting, the opportunity here is enormous. And this could lead to big profits from investors willing to bet on this emerging industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. David Gardner owns shares of Apple, Google (A shares), Google (C shares), and Sierra Wireless. Tom Gardner owns shares of Google (A shares) and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Sierra Wireless.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »