Israeli & Canadian Pharmaceutical Companies Leapfrog their way to the top Teva, Valeant VRX game changing drugs ms

Attention investors: take a long hard look at Teva Pharmaceutical Industries of Jerusalem and Valeant Pharmaceutricals of Montreal - you won't regret it !

Just last week nyse:TEVA paid $40.4 billion for Allergan's nyse:AGN generic drug business giving the world's largest generic drug maker an even bigger international presence (Allergan was/is present in more than 100 countries).

This also gives them more leverage because more revenue spreads fixed costs over more units of output - which is important in the business of low margin generic drugs.

Though ms drug Copaxone faces increased competition from Novartis and Momenta among others, their proprietary brand continues to grow (last quarter both in terms of sales +12% = 50% of company profit and about a fifth of company revenue) and share of the market for MS prescriptions (31%) - thanks in part to more innovative ways of introducing the drug to patients (3X a week 40mg version vs 6X by competing brands).  And don't forget about the over-the-counter products - Teva has hugely benefited from key partnerships with companies like Proctor and Gamble and even Canada's Life brand (Shoppers Drug Mart).  For instance in Canada products include sea salt for baths.

Another overlooked aspect of the company - it is deeply rooted in Israel and has strong connections with Israeli universities - this is key since these institutions are credited with having developed important drugs such as Copaxone and Azilect.

Financials - Teva was doing well even before taking into considering recent acquisitions - in GAAP terms operating income and net income more than doubled last year despite revenue being stable.  All major metrics have been stable since 2010 with non GAAP earnings per share up steadily : 4.54 in 2010, 4.97 in 2011, 5.01 in 2013 to 5.14 in 2014.

Teva - making Israel proud : The deal for Allergan is the biggest in Israel's corporate history !

Valeant Pharmaceuticals nyse: VRX - merging its way to the top one company at a time - acquiring game changing drugs

According to CEO Mike Pearson, Valeant remains focused on medium sized acquisitions - this, despite the fact that the more recent deals have been game changing (Salix Pharmaceuticals ltd for $10.1 billion) and the tug-of-war for control of privately held botox maker Allergan plc.

July 2015 - Just this month Valeant took control of one of Egypt's leading drugmakers Amoun Pharmaceutical by taking over parent company Mercury Holdings ($800 million deal).

Lithium Ion Battery Usage Soars, China Takeover, Growth Stocks Companies

Lithium demand is projected to rise very quickly over the next few years, possibly doubling within a decade. Consumption has the potential to increase even further if electric vehicles become commonplace; sales of Ford hybrid electric vehicles fell between 2010 and 2012 but set a new record in 2013: 65,326 (previous record is 35,496 set in 2010); total US sales for 100% electric vehicles +230% to 46,148; sales at Tesla TSLA keep going up-  Lithium Exploration Group LEXG is expected to be a key lithium contributor at Tesla's newest giga plant, the biggest lithium-ion factory in the world.
Don't forget about lithium-ion battery usage in aerospace: the new Boeing 787 Dreamliner operates on lithium-ion batteries- A key advantage of these batteries is a long battery life.

Bolivia knows this and is currently putting in place the infrastructure needed for companies to make the batteries within its own borders - a very wise move since there is a considerable amount of value added in the secondary industry.

This is especially important in GDP calculations:  If all of the parts forming a product are made elsewhere but assembled in China when exported, China gets credit for the whole thing despite having made no part of it. This has become a problem with respect to high-value US imports of electronics such as computers and mobile phones.

Lithium maintains a strong position in the industry, but investors must also be aware of the risks posed by alternative batteries - the Ryden dual carbon battery is just one example that's raising eyebrows.  It requires only 90 seconds to charge fully versus 30 minutes for lithium-ion.  It also has much improved battery life.

China Is Investing Heavily In Australia but Are Outright Takeovers In Anyone's Interest ?

In April, China made it easier for domestic companies to complete foreign takeovers:  up to $1 billion takeover deals don't  require government approval.  Virtually all of the takeovers have gone through smoothly with one exception:  Westside Corp Ltd asx:WCL rejects $164.5 million bid by China's Landbridge Group.

• Just this month
• Aquila Resources AQA owner of the $7 billion West Pilbara Iron Ore Project, got bought out by privately held Baosteel Group of China for $1.4 billion.  If I were an Australian shareholder I'd ask myself, will Baosteel bring over its own employees to run the mine ?  But shareholders were compensated well ($400 million was paid to former Aquila executive chairman) so the deal encountered no opposition.
• Another takeover this month (May 2014) has PanAust Limited asx:PNA going to Guangdong Rising Assets Management.  A 45% premium makes the transaction hard to resist ($1.4 billion $2.30 per share vs $1.58).
• The current gold price is posing challenges for Bullabulling Gold GGG:  hard time developing the Bullabulling Gold project.  Financing is not a problem for Zijin Mining of Xiamen, China and that gives it leverage in negotiating a deal.  The $24 million takeover is by Norton Gold ask:NGF, Zijin's Australian division.
• Earlier this year
• Carabella Resources CLR of Brisbane was taken over by Kingho Energy Group in a bid that was initially hostile (offer increased to $71 million in January).  The deal gives Kingo Energy control of Grosvenor West, a mega project that remains undeveloped due to high capital expenditure/development costs.

Big Gold Projects Propel Stocks Higher

High development costs ($1.77 billion) for Cadia East had led to construction delays, resulting in years of waiting for the underground mine (largest in Australia) to become operational.. but the extra capex is about to pay off nicely for Newcrest.  Cadia East will boost annual Cadia Hill gold production from under 400,000 oz to over 800,000 ounces (at a competitive cash cost).

Effect of Cadia East news on Newcrest Stock ytd +36%  6 months  +22%  1 month +0.1% vs Newmont NEM +2%  -9%  -8%, Barrick ABX  -6%  +1%  -10%

Canada's version of Cadia East is Kerr Sulpherets Mitchell, a 44.7 million ounce gold-250 million ounce silver-molybdenum mine that's 100% owned by Seabridge Gold.  Keep a close eye on ANY news reguarding its development:  Seabridge stock is due for a big jump in price.

China Agrees to $340 Natural Gas Price, It's A Done Deal 

The 30-year $400 billion deal reached last week between Russia and China will obviously impact the amount of natural gas China imports from other countries, but if you're Australia you shouldn't be too concerned :  Chinese companies already own interest in a number of Australian natural gas projects:  Curtis LNG project is 25% owned by Chinese company.  The Russian deal calls for Gazprom to sell 38m mmcf per year at the fixed rate of $340 per mmcf which is cheap, especially when you compare it to what the Europeans are paying for it.  Whatever happens though, don't expect Russia to ever play hardball with China when it comes to keeping the gas flowing - Russian government gets 6% of its revenue from natural gas exports.  A lot of the growth in Australia's natural gas industry is happening in the northern region.

Growth Stocks

Caterpillar CAT
Even though revenue and earnings declined slightly quarter on quarter, quarter to quarter earnings were stronger being up 4.7% to $922 million.  Pushing this hot stock higher is its earnings beating estimates: $1.61 vs $1.23.

Freeport McMoran FCX
eps beat analyst estimates : 49 cents versus 41 cents

MTR Corp MTRJY is the second largest land owner in Hong Kong.  little risk, lots of upside.  maintains AA+ rating at R&I.

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.

Seabridge Gold (SA) Hecla Mining Company (HL) May Draw Interest; reserves,production,mining

                      Seabridge Gold (tsx:sea) and Hecla Mining Company (nyse:hl) are two companies that investors can't seem to figure out.  Prior to the temporary shutdown of Lucky Friday, Hecla was one of if not the largest pureplay silver producer in the United States.  After the Lucky Friday incident, investors fled the company resulting in an immediate loss of 30% of its silver output, half of its lead output and some of its reputation.  But today, Hecla is reporting not only that it will restart Lucky Friday within half a year but also that it will be expanding it with the construction of a fourth shaft which will lengthen mine life, possibly to 30 years.  With $233 million in cash equivalents Hecla is also active in the M&A department;  Hecla laid out $110 million for US Gold & Silver back in July 2012 (which was turned down).  The bad news for the company ?  Total operating expense last quarter was steady with the previous four quarters even though revenue was way down (averaged $108.105m over those quarters but just $67.02m in the last).  Not all was bad though, Hecla did manage to double dividends q2q (2c per share up from 1c despite eps being only 1c).

Seabridge Gold really is A gold mine !

According to the company's second quarter report it "will continue to advance its two major gold projects, KSM and Courageous Lake in order to either sell them or joint venture them towards production with major mining companies."  
Ivanhoe Mines potential ?
Ivanhoe Mines (now Turqoise Hill Resources) more than quadrupled in value after Rio Tinto took interest in it.  Whether or not Seabridge does the same the fact remains it controls 100% of what will someday be Canada's largest gold mine.
Three days after releasing the last quarterly report, on September 5, 2012 Seabridge released data from exploration drilling done last summer.  Drilling revealed veins with the highest gold grades found to date !  The findings are sure to bring KSM's 2P gold reserves closer to 40 million ounces (was 38.2m according to last estimate done).  Over the entire deposit, the average gold grade is 0.55 grams per tonne but at a 2 meter intercept, one of the newest holes drilled revealed 66.7 grams of gold per tonne in addition to 287 grams of silver !! (average grade over the entire hole was 8.94 g gold, 41.6g silver).
Seabridge also revealed that it is only focused on KSM and Courageous Lake which is why it's in the process of divesting all other assets (big chunk let go last quarter in Red Mountain Project) but don't be fooled into thinking it's letting go of all other interests;  When it sold Red Mountain and various Nevada projects, in addition to cash Seabridge Gold received more than 4 million shares of each company.  So, when those other projects pan out (no pun intended) Seabridge will realize even more in return not that it isn't already giving investors a healthy return (sept 5 - oct 4 : +15.05%, july 5 - oct 4 : +30.16%).  Bad News:  No production means no dividends.

Watch Out !  Seabridge Comes With Risks
Core assets Kerr-Sulpherets-Mitchell (BC) and Courageous Lake (NWT) are located in regions where aboriginal groups also have land.  The First Nations people could be entitled to key land and thus other agreements may need to be reached.  Shifts in political conditions and/or regulations (environmental laws, tax laws) could impact the company's ability to continue developing either project.  Right now though everything appears to be stable and, considering exploration at KSM has been ongoing for more than six years without any major disputes, I'd say the rewards outweigh the risks.
Notes:  Last quarter, cash resources declined by -$19 million due to advancements at KSM and Courageous Lake - Courageous Lake 2P reserves surpass 6 million ounces - All of KSM's 10.3 million ounces of proved reserves reside in the Mitchell open pit deposit (including probably it's 27.5m) - 10.2 million ounces in probable gold reserves must be mined from a block cave (Mitchell 7.4m, Iron Cap 2.8m) - Iron Cap is the newest of the four deposits (added May 2011).

Hecla Mining Company

      Hecla stock price has been on the upswing since September 13, 2012 (+10% that day while adding modestly to that gain since then).  On August 7, 2012,  the week before it acquired an interst in Dolly Varden Corporation, Hecla Mining Company reported on the 1st half / 2nd quarter of 2012.  The results were mixed;  On the one hand Greens Creek produced less: 1.365043 million ounces of silver down from the previous year (1.5m ounces), steady with the previous quarter (1.328704m oz) while on the other hand the cash cost per ounce of silver produced was down significantly from the prevous quarter ($2.24 --> $1.03 /oz).  So why the 49.7% q2q drop in gross profit ?  A couple reasons;  Average realized silver price down -26.1% between last two quarters (1st and 2nd) $36.59 --> $27.05.  Production was steady but payable ounces was not;

Payable silver sunces sold: 1,133,764 oz (-39.7% vs 2q11, -20.6% vs 1q12).  Gold, lead, zinc