Thursday, December 26, 2013

Bitcoin Accepted By More Retailers, 3d Sensor Technology; BlackBerry's Turnaround & Bombardier BBD.B More Orders Planes, Trains

          You know things are crazy when the most solid investment right now may not even be tangible !  Bitcoin, the most widely used virtual currency gained 5% in trading the Thursday following Christmas day.  This, on news that major online retailer will begin accepting Bitcoin as payment early next year.  Bitcoin prices ranged wildly over the past couple months.. all time high is $1241 (November 29) up from just $100 in October... Bitcoin currently trades at ~$1240 USD.

Canadian Real Estate Investors Have Deep Pockets.. Makes Canadian Real Estate Market Less Risky

I'm optimistic about the Canadian real estate market, specifically commercial properties. Only 1.5 years ago, in May of 2012 Scotiabank sold Canada's second tallest building, Scotiaplaza to H&R Reit/Dundee Reit for an impressive $1.266 billion.  Then, last month we learn that Canadian real estate investors have been a major driving force behind the resurgent US real estate market;  between the years 2009 and 2013, Canadians outspent Americans by about $27 billion !

This year (ended August 2013) the biggest Canadian spenders south of the border were publicly traded companies ($4.6b), institutional investors ($2.3b), and private companies (1.3b).. they invested in office space ($4.2b), apartment buildings ($2.8b), and industrial complexes ($2.1b) among others.  You can be sure that these companies are eyeing the Canadian market and plan to step right in if and when Canadian prices start to decline.

Bad News at BlackBerry Being Overblown Again (surprise ?)

What hurts Microsoft won't hurt BlackBerry:  Unlike Microsoft, BlackBerry offers a robust operating system with the best reputation for security. What worked against MSFT won't work against BBRY. The last quarter was seriously hurt by Thorsten's for sale tag. People were confused about the future of the company, but now the situation is different the future is clear, BlackBerry is here to stay.
The media chooses to focus on only the worst news in the worst possible way !

  • Either say that the company sold 1.9 million handsets or say that it lost $4.4b;  The $4.4b loss takes into account 4 million devices sold.
  • The adjusted loss of under $400m compares favorably to the quarterly losses Microsoft's handset business has been racking up.
  • Without its cheap devices Samsung would be doing bad too (sales of high end devices plummeted at Samsung).  BlackBerry just released Q5 and other low end devices which will appeal to users of the BB7 phones in developing countries.
  • During this quarter (2q2014), BlackBerry had the worst kind of media attention possible, talk of the company collapsing which we now know to be false after revelations that the Chinese government was lobbying hard for Canada to permit a Lenovo takeover.  Now we are seeing a turnaround with Germany, and even the US Government favoring BlackBerry over iPhone.  As long as security remains a priority, BlackBerry will be a player.
  • Cash equivalents up to $3.7 billion.  Even without the $1 billion share issue cash down by less than half a billion.  A true $4.4 billion loss would've plunged the company into bankruptcy.
  • $4 billion of the $4.4 billion loss stems from structural changes + end of licensing deals made when the company was much larger + things that will not happen next year thanks to the foxconn deal.  
  • Under construction is a new security technology center in Washington DC.  This will give BlackBerry a cosier relationship with its biggest clients - government and security agencies.
  • New CEO John Chen is hiring a rebuilt sales force designed to target regulated industries, including government clients.
  • Last quarter BB sold roughly half a million BB10 phones.  That number can only go up since new CEO John Chen has made it his goal of lowering the price of the phones.
  • Market share remains strong in the middle east.  Service revenue remains strong being down by only -13% even though the number of devices sold fell at 3-4X that rate.

Thanks To Aldi, Supermarket Competition In the United States Will Intensify In 2014

Aldi recently said that US expansion (California, Houston, New York) will accelerate over the next five years; 130 new stores will open per year up from 80.  In the UK, Aldi has eroded market share away from all other grocery chains thanks to its unique sales strategy - like Costco, Aldi differs from the competition in that the focus is on select popular items as opposed to a larger product selection.. selling more of the popular items (1400 items vs 30th at typical supermarket) allows Aldi to offer deeply discounted rates.

Seraphim's stock picks

  1. Bombardier BBD.B - On December 12th American Airlines placed an order for 30 Bombardier CRJ900 aircraft and option for another 40 making this a deal worth between $1.4b and $3.4 billion.  Amercan Airlines VP said his decision to go with Bombardier (and a separate deal with Embraer) is based on lowering operating costs (replaces smaller 50-seater aircraft with larger more economical planes).  Also in December, Air Canada's deal with Boeing involving large 747 commercial planes was smaller than usual giving many the impression that it will renew at least part of its fleet with Bombardier's new CSeries aircraft.  On December the 2nd Bombardier sold three CRJ900 to China Express Airlines ($134 million) and entered into a conditional agreement for 13 others.  On December 6, 2013 Bombardier made another mega deal with new Chinese carrier Sutong Airlines involving 30 Q400 turboprops valued at $995 million.  Dec 20, 2013:  UK Metrolink orders 10 more Bombardier Flexity swift light rail (swl) cars boosting the previous deal up to 104 vehicles.  Dec 12: wins flexity tram order (32-> 42) from Mülheim Transport Authority.
  2. XYZ Interactive - A relatively new Canadian tech company (key focus areas started in 2008) that makes (and owns patents to) advanced 3d sensor technology able to be used in smartphones and tablets.  Their low cost position technical performance advantages make them a very attractive takeover target.. it was only a couple months ago that Apple Inc paid $350 million to acquire Israeli company PrimeSense, maker of motion-tracking chip technology.
  3. Detour Gold DRGDF - Owns one of Canada's five biggest gold projects . flagship mine reached commercial production recently.
  4. Seabridge Gold SA- I still like this one for the same reasons I gave in my last blog post.  Over the last month Seabridge Gold SA was up 1% outperforming key gold stocks Agnico Eagle Mines (reported output growth), Goldcorp (-3%), Kinross Gold (-6%), neighboring Pretium Resources (-5%).

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