Investors are rekindling their love affair with embattled smartphone maker Research in Motion.  The share price has nearly doubled since in September over excitement about the upcoming launch of the Blackberry10 in early 2012.  Analysts – the majority of whom had turned bearish on the stock over the past few years, are coming around as well.  Last week Goldman Sachs issued a “buy” rating on the shares and nearly doubled their price target.  Analysts at the influential investment bank said in a note to clients that estimates on RIM’s earnings are too low given the potential upside from the upcoming launch of the company’s next generation of smartphones.  Analysts at Jefferies & Co, CIBC, Byron Capital and National Bank have all recently expressed optimism about RIM, helping to push its shares higher.

But the risks are not gone.  First off, the company will most likely post an operating loss and poor sales again in the upcoming November quarter to be reported on December 20th.  The February quarterly report may not be much better either as the BB10’s will have only started shipping to RIM’s carrier customers at that point.  Since the stock has had such a big move, we see some risk of a pullback when these numbers come out.

Why has the stock done so well recently?  Estimates had just gotten too low and it was assumed by the market that the company would fade into obscurity.   The ultimate jury on the BB10 is still out.  There is no doubt that we are going to see a couple of quarters of inventory fill at the carriers and replacement of older model by many of the ‘diehards’ among their 80 million subscribers who will not have seen any significant new products in almost two years.  But what will happen beyond the May quarter and will BB10 become a legitimate 3rd player in market behind Apple’s IOS and the Android-based phones produced by Samsung?”

We believe that the QNX software acquisition the company made two years ago brought on an operating system that had been used to manage industrial applications from trucks to nuclear power stations and will be a more powerful system than either of the industry leaders.  We have met with management several times and seen some impressive demonstrations of the new line of products.  But marketing has always been RIM’s key weakness and they need to be able to sell the BB10 story to consumers and business users alike.  After adding to our position in late September, we took some profits in the past week and will probably wait until after the Dec. 20th report before looking at adding back again.

Gold and uranium prices also look to be resuming their uptrends.  After gold prices peaked at US$1800 per ounce in early October, they have been in a trading range since that time, dropping recently as low as US$1670.  But with central banks still flooding the monetary system with paper currency and the U.S. dollar appearing to be pulling back, gold prices seem ready to resume their uptrend.  We still expect the price to crack the US$2000 level sometime in 2013.  The gold stocks have basically never been cheaper compared to the price of gold and we have been adding to existing positions in Goldcorp (G-T) and Kinross (K-T) in the senior group and B2B Gold (BTO-T), New Gold (NGD-T), Iamgold (IMG-T) and Osisko Mining (OSK-T) in the mid-sized group.

Uranium prices also appear to have hit bottom in the US$40 per pound range.  While the market was over-supplied in the short-term due to the shutdown of all the Japanese reactors, long-term supply growth continues to look shaky and some of the Japanese reactors may actually come back on-line soon depending on the outcome of upcoming Japanese elections.  Meanwhile, the long-term Uranium price has not broken below the US$60 level and the cost of bringing on new production continues to rise.  We are meeting with the management of industry leader Cameco this week for a further industry update.  Meanwhile, we have added to existing positions in Uranium One (UUU-T) and Uranium Participation Corp (U-T), which is currently trading at a discount of almost 20% to its intrinsic value.

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