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 overstock.com 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

German Government Relies On BlackBerry, Pretium Resources Proves Seabridge Gold Underpriced, Oil Stocks (CPE)

         BlackBerry (bbry) gains on rumours that German government and possibly others remain more committed than ever to BlackBerry devices - a few months ago they ordered 40,000 q10/z10 units.  Apparently NSA snooping isn't being tolerated at all in Germany, and that has led to a government-wide ban on the iPhone.  Two reasons for this 1) Germany-based firm secusmart has created a micro sd card that, when used on a BlackBerry device, renders the phone impenetrable (enhances BlackBerry security via encryption technology) .. would take a minimum of 149 years to hack.  2) Apple's iPhone servers are located in the US where NSA has governmental authority .. unrestricted access to private information  3) Germany's federation office for information security (BSI) has developed software that must be used in government employee phones.  Apple's devices aren't compatable with secusmart software.

on the flipside
Could the NSA access BlackBerry servers via relationship with government ? The Canadian government helped the NSA collect information during the 2010 Toronto G8 summit.  This leads to other concerns:  Does the Canadian government have unrestricted access to BlackBerry servers in Ontario ? We know that a big reason BlackBerry is off the market is because the government won't ok such a deal if it involves a foreign company such as Lenovo, this leads us to believe that the government of Canada does have a certain level of influence over BlackBerry.

Gold Silver stock doubles on news of higher than expected pre-production

Nov 21-22 Pretium Resources (tsx|pvg) stock climbs 80% on news that initial ore samples taken from the area known as 'Valley of the Kings' within the company's flagship Brucejack gold mine in British Columbia, yielded higher than expected gold grades:  19% higher to be exact (16g vs expected 13g per ton).  That translated into 4200 ounces of gold, 3500 ounces of silver.  The mine won't begin commercial production until 2016.  Reserves estimated at 7 million ounces of gold, 35 million ounces of silver.

That makes my favorite gold mining stock Seabridge Gold (SEA) even more enticing.  You see, Seabridge has 5X as much gold and silver at neighbouring mine Kerr-Sulphurates-Mitchell.  Higher gold grades at Brucejack probably means higher gold grades at KSM !  Either way, Seabridge Gold has to be on your stock radar .. has much more gold than Pretium Resources at a property that is only miles away .. any company looking to develop Brucejack is going to take an interest in KSM.  Future news regarding development at KSM will have a huge impact on Seabridge stock.  With Brucejack prepping for 2016, it's only a matter of time until the focus shifts to KSM.

Watch Out: New tax on gold in India will affect gold demand

Two months ago, in September India raised the duty tax on imports of gold jewelry from 10% to 15%.   Unsurprisingly Thailand, a major source of India's gold (3% of Thailand -India trade) initially objected to the tax hike however by the end of October, Thailand agreed to abide by the new rules after India threatened to suspend imports of gold jewelry from the country.  India also introduced a tax of 10% on gold bullion.

The new tax on Indian gold imports will eventually have a significant affect on world gold consumption:  Last year, India was the primary driver of gold demand - the country accounted for a fifth of gold consumption worldwide (864 tonnes out of 4405 tonnes total; 11% more than China).

Sears Canada being run into the ground by parent Sears Holdings ? (owns 51%; Sears Canada closes)

Over the last five weeks, Sears Canada raised $695 million in two seperate deals that saw the 61 year-old retailer sell a number of its core, revenue generating stores.  In the $380 million October 29 deal, Sears gave up its most profitable location in Toronto's Eaton Centre (335 employees there alone, store is so big mall gets its name from previous tenant Eatons) and one of its biggest stores in Western Canada (Richmond BC).  What's most alarming about the deal is this:

Air Canada (AC.B) Profitable ? Revenue Up At Chinese Banks, Earnings Dividends At Citigroup, HSBC

Air Canada (AC.B) is making more revenue per passenger and that's one of the reasons investors continue to reward this airline stock with record growth (+52% last month, +150% last 3-months).  In fact just yesterday, the stock touched a five year high of $5.80 up from $1.80 exactly one year ago (Oct. 30).  The company has had success charging passengers additional fees for meals, pillows, earphones and other conveniences previously taken for granted.  Also giving the company lift is its own new discount carrier Air Canada Rouge launched in July 2013.
For the first time in a long time, earnings are showing signs of breaking into positive territory !  Quarterly net loss now at $(23) million, down considerably from $(160) million last year.  Passenger revenue is up (+$86m for 2q13, +$89m 1h13),  First half operating profit was $174m up 176% from last year's $63m.

Lower fuel costs (-$57m quarter, -$76m half) not the main reason quarterly operating expenses are down (1.4)% (total increase in salaries + currency effects were +$60m)  : this proves that the company is getting its act together ! 

Despite currency effects weighing on results [1h13 $(114m) vs +$26m] and wages/salaries up bigtime (+9% quarter, +7% half), overall operating expenses declined (-1.4% quarter, -0.6% half).  Also a positive sign: cash equivalents up 4.8% to $790m after declining (6.6)% in the second half of last year.  Long term debt was lowered by $315m (half) vs $238m last year. 

Airline Stock October 30 2013	1-year	3-months	1-month
Air Canada (AC.B)	209%	150%	52%
Westjet (WGA)	54%	34%	8%

Air Canada benefits from more international travel particularly to and from China;  The last two census results show Canada's Chinese population is up 141,070 or +10.5% in five years; in 2010 Canada acquired Approved Destination Status which is key since it was one of the last major countries not to have it.  At the time, it was estimated that by 2014 Chinese travel to Canada would increase 50%.  Direct competitor Westjet (WGA) has also been reaping the benefits of increased air travel within Canada and to and from the country.  First half revenue up +6.5% ($1,810.93 million), earnings up +22.6% ($135.8m).

Among The World's Largest Banks China's Phenomenal Revenue Growth;  Earnings Dividends At Citigroup, HSBC Remain Healthy

• TD Bank reported 18% growth in average loans (3q2013). 
• JPMorgan Chase - 3rd quarter earnings take a hit :  down -$380m due to - $9.15 billion pretax expense; $7.20 billion after-tax (eps down 185c) for legal expense in Corporate, including reserves for litigation and regulatory proceeding. - $1.60 billion pretax benefit; $992 million after-tax (eps up 26c) from lower reserves in Consumer & Community. 
• China Construction Bank - lending fee incomes climbed contributing to increased revenue.  earnings increases lagged analyst expectations of CNY57.69 billion.

 

Canadian Retailer Hudson's Bay Becomes Major Player In North America's Fashion Retail Industry

Just yesterday HBC's $2.9 billion takeover deal for Saks Inc received Saks shareholder approval.  The Toronto-based company will operate 320 stores in prime retail locations throughout North America.  After the merger, Hudson's Bay Company will have annual sales in excess of $7 billion.  Investors take note:  HBC growth plans for the company are synonymous with increasing shareholder value. 

Magna International (MGA) Reaches Record High On Sales, Gold Companies Get Leaner and BlackBerry's Survival (Fairfax FFH)

       A lot has happened since my last post not the least of which is news of BlackBerry's (bbry) disappointing quarter.  Although I'm confident the company will survive as a private entity within Fairfax Financial (aka the Berkshire Hathaway of Canada), as an investor you have to be frustrated with the way things turned out - BlackBerry has already inked a $4.7 billion buyout deal with Fairfax (ffh) which already owns 10% of shares - at $9 a share the offer gives shareholders almost no return for the tech maker's bes, qnx and consumer handset division :  7500 patents alone are estimated to be worth between $1b and $2 billion, then there's the company's $2.82 billion cash on hand (up $800m from a year ago).  In fact BlackBerry's 2500 security-related patents could form the cornerstone of a new secure enterprise company.

As an investor the deal doesn't make sense, but as a Canadian I'm content with it.  You see, Toronto-based Fairfax is headed by Prem Watsa who is a big supporter of Canada's tech industry (1800 technology firms present in Waterloo and Ottawa, Ontario is North America's 3rd largest tech hub after California and Texas).  If there's any company out there that will give BlackBerry a decent chance to survive intact it's Fairfax (taking company private means it won't be broken up).
Personally, I feel as though BlackBerry can still make it the market - the billion dollar quarterly loss-writedown was blamed squarely on unsold z10 phones, the same phone that holds the distinction of being the company's highest priced device (profit from one phone as much as 3X as much as Nokia Lumia).  The corporate market didn't mind paying more (German government and Nato bought it) but many other consumers didn't -  From the reviews I've read and those of my peers, it's obvious the problem with the phone was the high price not the device !  At times last year even Apple blamed slower sales on the price of its phones.

The good news :  BlackBerry has since launched cheaper devices (q5, z30) and a high-end device with touch pad catering to traditional blackberry lovers (q10).  When BlackBerry gets the price right, the phones will sell.  Blackberry Enterprise Server remains in a league of its own, the company's devices continue to receive rave reviews, market share similar to Windows OS which heavyweight Microsoft remains committed to (paid $7b for Nokia handset division).  How much longer can BlackBerry rely on the corporate market ?  by 2016 38% of companies are expected to stop providing mobile devices to staff.

Techstocks continue to shine !   Interbrand just released its annual ranking of the world's most valuable brands and technology companies took four out of the top five spots including, for the first time the top position:  #1 Apple ($98.3b +28%), #2 Google, #4 IBM and #5 Microsoft.  The next highest ranked tech company Samsung also moved up, to #8 from #9 last year.  Microsoft's recent acquisition Nokia was the worst performer, falling to #19 from #57.

Auto parts supplier Magna International is red hot!  

Though last quarter dividends per share didn't change from three months prior, sales (+16%) and earnings (+19%) were up by a healthy margin.  Not unsurprising given that, US auto sales rose at a torrid pace last summer (annualized rate for August was 16 million up 20% the strongest in six years).  Auto sales expected to slow to 1.15 million units this month (at GM only by a couple percentage points; GM is one of Magna's biggest customers); but a big reason for that is fewer selling days.  Ford also one of Magna's most important customers, reported a sales increase of 12% in August.  Last year, Ford awarded one of Magna's car plants in Brazil with a silver award for its 'superior quality, delivery and cost performance".

Since 2009 Magna has also been a key partner of Ford's electric vehicle division, it was in 2011 that Magna began assembling electric and hybrid vehicles for Ford (notable since this year 2013 Ford is on track to break its own sales record for hybrid vehicles of 35,500 reached in 2010).  Ford's August year-to-date auto sales totaled 221,270 +17.5%.

Barrick Gold Gets Leaner

With gold prices testing the $1300 level gold companies are being forced to adjust accordingly - gross production cost which includes expenses associated with exploration must be reduced so that companies can maintain healthy profits (investors have been shown to punish companies when earnings drop - they seem oblivious to the fact that a 20-30% drop in the gold price is going to make it next to impossible to avoid a quarterly earnings drop).  Barrick Gold has responded to this pressue by selling high cost operations;  Last summer it was the 3 Australian mines that comprise Yilgarn South (1h2013 196,000 ounces at a cash cost of $1145/oz), sold for a combined $300 million.  Then this month, the company announced its intention to sell two more mines for $100 million.  This would put Barrick Gold halfway through its ongoing plan to sell or lower output at 12 of its 27 mines.

Gold Price Ratio Suggests Recession Looming, Target TGT Underperforms & Growth Stocks Nasdaq AFCE, ALXN

Relative to the United States, Canada has higher wages, higher fuel prices, stronger unions, and higher distribution costs and that often leads to higher retail prices.  Target Canada will open its first 124 stores in 2013 but it won't be an easy transition; The Canadian dollar is at a low right now (95.0c US) which compounds the problems Target will face in adjusting its prices to Canadian expectations.  Since launching in select markets earlier this year a new problem has cropped up :  consumer satisfaction dipped below 30% in August (vs May).

Target (nyse:tgt) Underperforming

Latest quarterly profit -13% weighed down by Canadian operations (expansion costs).  As of quarter-end Canada is home to 68 locations with another 56 to open by year-end.  Canada accounted for $275 million of the company's $17,120m sales this quarter but Canadian performance still not up to par.  Total North American sales were suppose to be up 2% this quarter not the realized 1.2%.  Earnings at 96 cents a share ($611m vs $704m last year) a cent below expectations.

Recession Looming ?

Signs certainly suggested it on Friday when growth in silver and gold prices contrasted with next to no change for the primarily industrially used platinum group metals. 

So far in August (1-20) investors extracted $30.3 billion from US bond mutual funds which amounts to the highest monthly outflow in 19 years.  Markets both domestic and international have benefited from the US Fed bond buying program which was originally instituted to help keep mortgage interest rates down, however what the Fed is now saying is that, even after its eventual exit from the program, short term rates shouldn't go up even though long term rates will.

The Fed purchases $85 billion worth of bonds each month - half mortgage bonds half treasury notes, as a sort of quantitative easing.  Because the Fed isn't being clear on when it will stop buying mortgage bonds, interest rates are gradually moving up consquently people wanting to buy homes are doing so before the expected spike in rates (July sales of existing homes +17.2% versus last year).  30-year fixed rates - May 1 : 3.35% ; August 23 : 4.58% highest since July 2011 ; 15-year rate @ 3.6%.
Unemployment remains a problem, it was as high as 8.2% in July.  Also, jobs numbers (+170th last month) are weak - most of the new jobs are part time and not specialized;  In June for example 400,000 people with college degrees lost jobs while 250,000 people without college degrees got jobs.  Another sign pointing to a weak economy - average age of vehicles on the road now 11.1 years, the highest on record.

Investing In Bullion, Make Gold A Priority (silver price, platinum)

                      Though it's true that for much of history the gold to silver ratio was 12, that trend ended more than half a century ago at a time when gold and silver prices were a lot lower than they are today.  In recent history the ratio has been somewhat erratic ranging from a low of just over 30 (April 2011 gold avg $1474, silver avg $42) to a high of 85 in 2008;  During this period there was a lot of downward pressure on both ironically coming from one of its biggest buyers central banks - rising interest rates cause money to flow out of gold and into other sectors of the economy but gold still stood out, maintaining a price at least 75% of its high, silver however presently trades at only 40% of it's 2011 high of $50.

During the last recession the price of platinum fell below the price of gold, an occurrence that usually only happens during crises  - the last time it happened was in the 1970's when the world's main economic drivers, the US and Europe were going through recessionary periods of low growth, high unemployment, high debt levels and oil prices.

The more recent inverse relationship between gold and platinum dominated the period of August 9, 2011 to January 2013.  Prior to that, since 1986 the price of platinum always exceeded gold with the exception of very few brief periods but even then the difference was marginal.  What this means is that the current economic climate is not as rosy as it's made out to be - the factors now driving gold closer to platinum are the same ones that come into play during times of economic uncertainty (central bank buying, inflation leads to lower confidence in the dollar, causing people to jump onto the bullion bandwagon).

Platinum versus Gold

For bullion buyers, the platinum group metals (pt, pd, rh) provide an interesting alternative to gold but a couple other key factors to consider may make gold the safer option.  In 2008 when rhodium hit $10,000 an ounce before hitting rock bottom a year later (2009 average $1500) investors lost interest in the white metal.  In a healthy economy, demand for platinum and palladium will still be there since both rely on industrial (catalytic converters) and high end markets (white gold plating, platinum jewelry);  however, yearly demand in general is not nearly as high as it is for silver or gold;  2012 platinum demand was about 6 million ounces, 7 million ounces for palladium which is only a fraction of the 155.4m ounces of gold, 1.16b ounces of silver consumed.

2012 exit year - Global reserves of platinum group metals total 2.328 billion ounces (2013 Mineral Commodity Summaries: 66m kg, annual production represents 0.6% of this) versus 1.799 billion ounces for gold (annual production represents 5% of this).  This doesn't sit well with me given that production of gold is some eight times greater than all platinum group metals combined.  As an investor what this tells you is that it's a lot easier to raise mine output to either match higher demand /or to put downward pressure on the price, than it is for gold.  At current prices, gold is just as rare as the platinum group metals but demand remains many times greater.  This is precisely why the rhodium crash of 2008 could never happen to gold (rhodium supply increased substantially as miners saw an opportunity to sell at higher prices but it turned out that demand was not nearly as strong as anticipated).  Platinum may be brighter but from an investment perspective gold still outshines it. 

Demand for platinum has a shiny future - light vehicle production is expected to increase by 13.6% over the next three years, with each vehicle needing a catalytic converter containing four grams of platinum and palladium what that amounts to is an additional 1.54 million ounces of pt/pd demanded.

Sobeys Leaps To The Top In Oil Rich Alberta, Acquires 213 Grocery Stores From Safeway (market share Loblaws)

        June 12th was a big day for Nova Scotia's biggest company Empire Company Limited (tsx:emp.a).  On that day, Safeway (nyse:swy) agreed to sell it 213 grocery stores for C$5.8 billion.  Sobeys last major move was a 1999 deal involving the Oshawa Group, that takeover only cost the company $1.5 billion but added more than $4 billion in annual sales and increased the number of locations by a factor of two.
The Safeway deal makes sense for Sobeys on a couple fronts. 
1) cost savings !  synergies of $200 million per annum averaged over the next three years.
2) Gives it grocery stores in sought after locations
3) Sobeys becomes a truly national grocery chain (large format supermarket locations go from 3 to 78 in British Columbia) 4) Gives it a leading market share position in Alberta which is significant for a couple reasons  i) Alberta's population growth is the highest among Canadian provinces ii) Alberta household income is some $15,000 higher than the national average meaning consumers could be more open to buying higher priced premium items (private label organic products have a higher profit margin).   July update - Sobeys parent company Empire Co exits the theater business by selling 44 theaters housing 349 screens for $255 million cash.  24 cinemas in Atlantic Canada (179 screens) will go to Cineplex for $200 million.  Landmark Cinemas is paying $55 million for the 20 Empire theatres in the rest of Canada (170 screens).  This is consistent with Empire Company's original plan to use $1 billion from asset sales to pay for Safeway (at fiscal 2013 year end the company had only $455m in cash).

The facts
- Sobeys pro forma annual revenue goes from $16 billion to $24 billion.
- 168 of the 223 Safeway stores (213 grocery, 10 liquor) are in British Columbia (75) and Alberta (93).  49 in Saskatchewan (33) and Manitoba (16).  Another 6 are in Ontario.
- Sobeys also gets 10 liquor stores (already has 29 lcbo stores most in Alberta) and 12 manufacturing facilities.  199 in store pharmacies, 62 fuel stations.
- Fuel business is growing !  189 gas stations in Quebec, 71 in Atlantic Canada and now 62 more in Western Canada.
- In the first half of 2013 $515.1m of the $780.5m in new revenue came from gas sales.  Boosting sales of gas is an effective way to increase revenue and cash flow. 
- As large a deal as it is, the Safeway acquisition doesn't give the company any additional market share in Quebec, and doesn't make much of a difference in Ontario (6 Safeway locations).  All of Ontario's grocery market share is held by Loblaws, Metro Inc, and Sobeys.  Sobeys needs organic growth there, acquisitions are not really an option.

A Next Move For Sobeys

 

 

Sobeys is in an enviable position.  Target (nyse:tgt) is allowing Sobeys to sell its own Compliments branded items at new Target stores across Canada.  Sobeys leads in grocery market share in Atlantic Canada, and discount chain FreshCo is having a lot of success competing with Loblaws and No Frills in Ontario.  Sobeys arguably runs a more diversified business than Loblaw Companies and that makes it a great investment.  Loblaws does have something Sobeys doesn't, a clothing business, but with pressure on apparel suppliers in Bangladesh to spend more refurbishing factories, increasing wages, profit margins may also be under pressure.

•  Lawtons can compete with Shoppers Drug Mart on a national scale. 

BlackBerry Undervalued: Investors Ignorant of Q10, Z10 Brand Strengths (bbry unit sales, smartphone market share)

         While BlackBerry has yet to release a low-end, more affordable BB10 phone to compete with Nokia's $99 Asha 501, I don't see that as being a major problem for the company going forward;  1) Its core customer base is still the high end corporate market 2) The market for high-end phones in key international markets is growing (Indonesia, South Africa, India), one reason for that is the modernization of mobile infrastructure capable of handling more data / 4G.  BlackBerry is the top smartphone brand in Indonesia, South Africa, Argentina and a top three player in India behind Samsung and Nokia.
more...   that doesn't mean however that Research In Motion does not need to eventually introduce a more affordable product.  BlackBerry 7 devices (Torch, Bold, Curve) remain popular in the East and with RIM scaling back production of that line, at least one of the newest phones (running on OS10) will need to be introduced to fill in the gap. 

BlackBerry Detractors Already Admitting Defeat
One of BlackBerry's harshest critics, an analyst at Cannacord which had slashed its sales estimate for BB10 phones earlier this year, is already calling the estimate wrong, off by at least half a million units per month. 
Early indicators suggest sales of the both the keypad (Q10) and candybar (Z10) phones are strong however it should be noted that those statistics don't take into account most international markets where the devices have yet to be launched.

Nearly 60% of RIM's 2012 revenue originated outside the US, UK and Canada.  In the Middle East where BlackBerry holds the leading share of the market for new phones at 35%, sales of the Z10 phone though not overwhelming remain promising at a rate of just over 250,000 units a month in Saudi Arabia and the UAE.  The figure doesn't include the Q10, something that has to be taken into account given that the keyboard remains popular among clients in the Gulf region.

Over the past year, Nokia introduced many of its key new smartphones while BlackBerry released nothing new (no full quarters reported on yet).  Despite this, BlackBerry somehow managed to sell the same number of smartphones as Nokia in the most recent quarter (4q2013).  The 6 million unit figure represents just under 3.0% of the global smartphone market, not bad considering BB10 was out for only a month in limited capacity (not available in the US) and that the phones have received rave reviews since being launched in the United States in April 2013.  Altogether, RIM sold 28.1 million smartphones in fiscal 2013 (March to March). 
Last month (April 15 to May 10) Research In Motion stock was up +14% making it one of the best performing tech stocks.

Battery life:  Can't go wrong with the Q10 ! 

The Q10 battery is larger and longer lasting when compared to OS7 phones.  The result ?  10-12 hours of device use on a single charge, more than double what the competitors have to offer.  This is just one reason why I'm optimistic about corporate clients remaining with BlackBerry.  Canadian Tire which has over 3,000 corporate users is one of several major companies already committed to the BlackBerry 10 models.

More reasons to buy Research In Motion:  23 of the 25 leading mobile carriers in the US, EU5 and Canada carry BlackBerry's newest Z10 smartphone compared to only 14 for the Nokia Lumia 920 meaning that RIM is poised to eventually outstrip Nokia in smartphone sales.  Not bad for a company with a market capitalization 40-70% lower.
RIM is succeeding in the high end market whereas Nokia is making a push for the low end market.  I don't expect sales at Nokia to best BlackBerry anytime soon, with Nokia's devices being low-end their margins are quite limited.  Even BlackBerry 7 phones are more profitable than Nokia's newest, and profit from one Z10 equals profit from three Lumias.

Gold Demand Remains Strong Despite Dip In Price (China, ETF, jewelry, bullion, central banks, supply)

     
          Between January 2012 and January 2013 central banks showed an insatiable desire for gold !   Even though prices weren't as high as they were in 2011 ($1895 in September 2011 vs $1780 September 2012) they were high enough as to give holders of the yellow metal a unique opportunity to sell at a generous price. 

So did debt laden countries sell ?  NOPE !  in fact just the opposite happened:

Italy kept its reserves stable at 2451.8 tonnes but because its total reserves fell slightly the % of reserves represented by gold went up from 71.0% -> 72.5%. 

Holdings by Greece actually went up 0.3 t to 111.9 tonnes which means gold now represents 82.7% of reserves up from 81.5% last year.

 Spain 29.7% -> 30.4%        281.6 tonnes ranks #18 globally

 

more information about gold reserves at International Gold Reserves by Country

 

China The Sleeping Giant

Though officially no significant movement was made by the Chinese, the world's second largest economy has routinely showed interest in boosting its reserves.  $3.3 trillion is in American dollars but the gold that it has is only worth around $50 billion (at a spot price of around $1500 an ounce). 

China has been the leading gold producing nation since 2007, at 370 tonnes in 2012 (+15t), its output is about the same as Russia and South Africa combined.  Because most of the gold is mined at many small operations by minor companies, it's not so easy to keep track of where all that gold ends up.  Taking into consideration the large number of nationalized companies in China and that almost none of China's gold output makes it out of the country, it's possible that Chinese reserves are higher than officially stated.  The only incentive China would have to not disclose the actual amount is to keep the price relatively stable, since skyrocketing gold prices would wreak havoc to their consumer market (jewelry demand alone is 265.5 tonnes, more than total US consumer demand in 2012).
America's excessive printing of money is another reason China needs to diversify out of the US dollar.  Gold represents only 1.7% of China's reserves compared to 64.1% average for all other countries (up from 62.6%).  To put things into perspective, if China's gold represented the same fraction of total reserves as US holdings do, China would have 5.8 times as much gold as the United States (47.2 tonnes).

Gold Demand for jewelry (-3.2%), bullion (-17.1%) down in 2012 but demand by central banks (457 -> 535t), ETF's (185 -> 279t), and China (779.8 -> 776.1t) remains strong.

 

Countries More Picky About Where Gold Is Stored

Germany announced earlier in 2013 that it wants to repatriate 674 tonnes of its reserves from American (300 tonnes) and French (374 tonnes) vaults.  Other countries such as Switzerland are also thinking about doing the same thing.  Switzerland has 20% of its reserves in the UK, 10% in Canada; Switzerland did this originally as a way to keep its gold safe during war times.

Grocery Stocks On The Move Carrefour Group CA, Sysco SYY, Sobeys

Food stocks Sysco syy, Carrefour Group and Empire Company Limited provide opportunity for investors at a time when there's not much to be enthusiastic about. 

In Canada a weaker dollar is akin to an interest rate cut discouraging spending in that country.
In the mining industry, weaker gold and silver prices cut into profit margins last year, leading to weaker results (eight of the world's tens largest gold companies reported a drop in earnings last year).

Weak jobs numbers in the United States affects the world's biggest consumer market, making companies involved in the clothing industry riskier investments, and now bank stocks could be hit as a result of ongoing uncertainty in Cyprus.  Confiscating people's bank accounts will undoubtedly cause many in Europe to keep their money out of banks since many of Europe's largest financial institutions are based in Italy and Spain, two countries that could follow Cyprus's example if the Troika's new bailout rules are instituted elsewhere.  Will banks like Banco Santander allow money from client account to be taken in order to pay down national debts ?

 But Grocery Stocks Are Different!

People don't have a choice when it comes to eating.  Stockpiling food isn't something most will be considering either since people are increasingly health concious which makes them reliable on perishable foods (since the alternative is food that's loaded with unhealthy preservatives). 

Grocery stocks have grown nicely over the last year despite the inability of many to hike prices in step with price inflation (Tesco for example reported +1.8% increase in same-store sales for the three months ended January 5, 2013 despite lower market share and lower sales of frozen food).  Also in the UK: grocery industry market growth +3.7% lags general inflation +4.3%.

This month, Empire Company Limited (emp.a) reported a drop in gross profit margin (24% to 23%) and a 32% decline in cash equivalents as well as 6% decline in net earnings but the stock remained in positive terroritory despite that (+12% last three months). The food division, Sobeys profited 8% more but that was because the food division includes gas stations (236 Shell gas stations purchased last year). Sobeys is the second largest grocery retailer in Canada but third largest in Canada's biggest market, Ontario.


Carrefour Group (euronext:ca) is another example of a solid growth stock.  In 2012 the food retailer profited 3.3 times more than the previous year (€1.233 billion) despite a sales increase of just 0.5% and a decline in ebit of -1.6%.  It turns out the company's assets are more valuable that people think !  CEO Georges Plassat has been been busy steering the company in a more profitable direction.  He thought that operating in 30 countries was too demanding and so Carrefour started selling off assets, starting with Greece.  Competition in the countries Carrefour has been exiting is high and that makes its businesses attractive to potential buyers.  Colombian operations were sold for $2.5 billion which represents 20 times enterprise value/ebitda, investors liked the return and the stock moved higher.  In 2012 Carrefour pulled out of five countries.  The money from the asset sales helped the company pay down net debt (€6.9 billion to €4.3 billion).  The next country Carrefour is contemplating leaving is Turkey and you be sure the return it will get for assets there will be at a premium.
Carrefour also has an insurance division that has exposure to South America (35% of 1b net banking income is from Argentina and Brazil).  Carrefour stock price +10.85% last three months, +32.31% last six months.

Gold Prices In Limbo, BlackBerry BBRY Gradual Trend Upwards, Heinz Takeover A Foreign Acquisition HNZ

A lot has happened since my last post so I'll be brief. 
Gold and silver price shows weakness despite a surge in demand.
The price of gold (and even moreso silver) has been weak despite

1) Record sales of silver eagles during the months of January and February
2) Increasing demand on the comex for both precious metals
3) Russia and China continuing their buying spree
4) Growing evidence that some of the popular gold and silver ETFs have only paper claims - which they can't physically backup.

Though I maintain that over the long run, you're safest investment route is in physical gold and silver, over the short term, prices might trend lower ... much lower.
In fact Goldman Sachs thinks that gold is on its way down to $1200 an ounce - a fall of almost 30% from current levels, pushed down by US interest rates which are on their way up (whether the economy stabilizes or not, interest rates can't get any lower than they are now).

I can both agree and disagree with their assessment.  Higher interest rates can depress prices but I think that other factors will eventually come into play that will counteract the effect.  The fiscal cliff is just starting to kick in which will eventually create a need for more quantitative easing: QE3, followed by QE4, QE5, ... etc.  The US trade deficit remains only marginally lower than it was in 2011 ($540.4b vs $559.9b) despite big jumps in fuel sales to overseas buyers/crude output reaching 766,000 bpd which is a 15 year high, so imagine what would happen if oil production and fuel sales declined, which John Kerry's policies appear to favor.

But with the Chinese yuan renminbi continuing to depreciate against the American dollar, there's no reason to expect the trade gap with China to alter significantly anytime soon.
What about China ?  The world's second largest economy and key purchaser of US and European debt (electric grid in Portugal now owned by Chinese company) is facing new problems of its own some geopolitical others domestic.  Foxconn (Hon Hai Precision Industry) which is the leading supplier of components for America's biggest company Apple Inc (AAPL), has stopped hiring new workers - a stock selloff ensued as investors took that to mean that sales of Apple's products are falling off.  However, at the same time Foxconn expressed an interest in opening new manufacturing centers overseas (suggesting that perhaps the problem is with China/ Apple wants more American workers).
For January 2013, foreign direct investment (FDI) into China was down 7.3% to $9.3 billion which is a four year low, in fact it's the largest decline since November 2009 (-9.9%)

Interest in BlackBerry is Growing and it's not just from Business Clients

                    This month, BlackBerry launched the first in a line of QNX powered smartphones running on the totally redesigned blackberry 10 platform.  I spent a lot of time last year defending RIM's strategy, technology and reputation and so it's refreshing to finally see the company get credit for all the R&D that went into developing their current products (the Z10 is groundbreaking and that's just what RIM needed to keep detractors at bay, otherwise, attacking them would be very easy to do considering BlackBerry's US market share remains quite low). 

The company took quite a beating the last two years for sticking to its own platform (and apps) while remaining steadfast in their dedication to security and to serving the needs of corporate clients.  Though the PlayBook remains a work in progress (sales steady but only because the market is growing) the new line of handheld devices are proving popular among both business and non business clients, giving shareholders more reason to be optistic.  Investors take note ! - The new BlackBerry Z10 was first released in the UK followed by Canada (February) then finally the United States (March) meaning that sales figures won't fully show up in quarterly reports until the summer (next results will be released in March followed by June).  Over the last 3 months BlackBerry (Nasdaq : BBRY) is up +23.6% which outperforms other techstocks Nokia (+18.93%), Apple (-23.96%) and even Google (+19.24%). 

Demand for the BlackBerry Z10 must be solid given that RIM has already increased  production capacity.

According to CEO Thorsten Heins

"we still have an installed base of 79 million subscribers. And BlackBerry 10 offers something that Windows Phone cannot, namely, the strict separation of business and personal information. The Microsoft operating system cannot imitate times just between evening news and weather reports". 

Heinz Gets Acquired But Who's Really In Control ? Brazil's 3G Capital or Omaha's Buffet ?

                   And finally, Heinz Ketchup gets taken over by investment firms Berkshire Hathaway, 3G Capital.  It's $23 billion in cash with the rest of the $28 billion figure stemming from Heinz's $5 billion debt load ($4.1 billion long term).  What's notable about this takeover is that 3G Capital, the foreign company involved is actually the company receiving a controlling interest not Berkshire Hathaway.  Former shareholders are obviously happy with the 20% premium they received but what about the employees in Pittsburgh, who will now have to accept that most important decisions concerning the company will be made in Brazil.

Palladium Production Leaders Record Lower Volumes, revenue by metal companies Norilsk, AngloPlatinum, Lonmin

Between 2003 and 2010 palladium prices averaged 20% to 25% the price of platinum before reaching today's high of around 40%.  There are many reasons for this
- Toyota using palladium in place of platinum in catalytic converters,
- Palladium was less affected by the problems in South Africa
- Lower Russian output.  The price ratio could increase even more in the future because supplies haven't been tight as compared to alternatives platinum and rhodium. 
- According to some analysts, there was a platinum overproduction of half a million ounces in 2012.

Norilsk Nickel nilsy is the world's largest nickel producer and ranks among the top five companies in terms of platinum reserves.  The company operates in Russia, Finland, Botswana, South Africa and Australia.  The Norilsk deposit in Russia was among the first exploited platinum deposits.

From January to September 2012 Norilsk produced 2.077 million ounces of palladium, down 1.2% from 2011.  Russia was the source of 96.1% or 1.996 million ounces.
In interim 2012 the company earned $1.481 billion (-22.0% from $1.818b) on revenues of $5.929 billion (-19.2% from $7.335 billion).  Revenue attributable to palladium:  1h2012 15.7% (1h2011 15.5%).

Anglo American Platinum pink:agppy - Palladium production down for the nine month period but up 4.3% in the 3rd quarter (376k oz -> 392k oz).  Sales of platinum group metals:  3275 million ounces (-7.45% from 3535m oz).
Prices achived:   Platinum $1513 (-14.8%), Palladium $637 (-17.4%), Rhodium $1304 (-39.3%), Nickel $17,159 (-30.1%).  Cash operating costs per ounce of platinum produced:  R14,976 +14.4%.  Unki production +20% year on year.  An illegal mine strike cost the company 2,000 oz of platinum output in the third quarter.
Biggest contributor to revenue is the Mogalakwena Mine.  Mogalakwena contributed 24.8% of six month revenue came from the mine (-8.6%).  9m2012:  $983,000 down from $1,038,000 in 2011.
% revenue from palladium:  16.4% down from 14.9% last year. 

Stillwater Mining Company nyse:swc, tsx:swc

• Has a three year agreement with General Motors Corporation for a monthly delivery of a fixed amount of platinum group metals (platinum, palladium, rhodium) which is set to expire at the end of 2013. 
• one year agreement with Tiffany & Co expires end of 2012.
• Supply agreement with Johnson Matthey.
• Year to year agreement with Ford Motor Company.
• No outstanding derivative contracts
• one of only two platinum/palladium companies based in North America (other one is Canadian mining company North American Palladium)

43% of total revenue comes from PGM recycling up from 37% last year.  Avg realized price in 3q2012 was $611/oz down -18.9% from $753 in 3q2011.  3q2012 palladium production:  97,500 ounces down -2.6% from 100,100 ounces in 3q2011.  94,100 ounces came from the Stillwater mine in Montana, down from 96.800 ounces in 2011.  Nine month palladium production:  294k oz -5.5%
% revenue from palladium:  46.9% down from 48.8%.

Lonmin lon:lmi
Fiscal year ends September 30. It's the 3rd largest producer of platinum in the world. All of its mines are located in the Bushveld Complex of South Africa. Production in the three months ended September 30, 2012 was down 45.7% due to a mine strike (-110,000 oz), however refined platinum was down only 20.8% due to stockpile usage.
9 months to Sept 2012: 216,974 oz -10.0%.
% revenue from palladium: 13.1% (15.6%). fiscal 2012
Fiscal year 2012 revenue: $1.614 billion -18.98% ($1.992b),
Total PGM sales: 1383.945 k ounces down -3.6% from 1435.929 koz the year before.