In other technology news, Lenovo is striking quickly to gain strong technology and assets.  After announcing recently that it was IBM’s server business, it is now buying Motorola’s smartphone business from Google for US$2.9 billion.   This is largely positive for Google, which sheds a low-margin hardware company, while retaining Motorola’s patents and diminishing its conflict with its Android-hardware partners such as Samsung.  This also fits with the recently announced strategy of Blackberry (under new CEO John Chen) to outsource the manufacturing of all its handsets to Foxconn of Taiwan.  This will allow Blackberry to focus more attention on its core security benefits, its BBM service, its expansion into automobiles and its continued dominance in the enterprise market, while letting Foxconn take more of the risk in the more volatile and competitive consumer handset business.  Our top technology holdings include Qualcomm, Apple, Google, Facebook, Microsoft, Cisco and Blackberry.   We recently added back Canadian information services provider CGI Group.  The stock is down more than 20% from its high on the problems with the launch of Obamacare in the U.S. and negative headlines from some high profile short sellers on the stock.  But this week’s earnings release shows a growing backlog, stronger European profit margins and an outlook which includes substantial cash generation, more stock buybacks and the potential for further acquisition like the transformation Logica purchase made two years ago.  Trading at only about 10 times next year’s expected earnings we see good upside for the stock.

One commodity we are particularly bullish on is Uranium.  While the Fukushima disaster in March, 2011, sent prices plummeting as Japan closed all of its nuclear reactors, we are starting to see a recovery in prices as energy needs continue to grow and this remains one of the lowest long-term sources of non-renewable power.  China has massive expansion plans in nuclear power generation over the next decade as do many other emerging economies.  Japan is ‘energy-starved’ after shutting down its reactors and has seen its trade deficit soar due to the costs of imported energy.  We expect that they will re-start many of their newer reactors in 2014.  More importantly though, the global supply picture is expected to tighten over the next few years as mines shut down and fewer new ones are opened, with most of those needing Uranium prices in excess of US$60 per pound to be profitable.  The chart below shows how production is forecast to begin falling over the next few years as many of the excess supplies are used up. Demand growth will be in line with the needs of the new reactors.  Also, utilities have been carrying lower than normal inventories because supply was so ubiquitous.  They may accelerate their purchase as supplies tighten.Uranium supply down, demand up

The bottom line is that we see Uranium prices moving back into the US$60-70 over the next few years, almost double today’s price.  The biggest global player in this market is a Canadian company, Cameco Corp.  We own Cameco as well as Uranium Participation Corp, which is a company which owns Uranium in various forms and is as direct a play on the commodity as you can find.  The stocks have had a sharp recovery over the past six months and could stall out for a while, but we see the sector doing substantially better than the overall market over the next 3-5 years.

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