A Comment -- General Comments From an Expert (A Commentary)
BUY
COMMENT
Uranium - Historically, there have been major discoveries followed by a lot of green pasture (Closeology!). Those companies were able to raise money in the venture capitalist market, but all went to zero. Stay with companies that have proven reserves, good management and near production. If a company only has aerial surveys, you are at least 7 years away.
COMMENT
Rate of earnings per change. Paraphrasing his example. Used the example of RIM. If it was expected to sell 500 thousand, but they actually sold 700 thousand, then the stock price goes up because first they sold more units so there is more value in the company, and second the expected amount was lower then the actual, so the stock price will be adjusted upwards. Then if the next quarter they sell 1 million units but were expect to sell 700 thousand, the same thing happens again, but amplified. The opposite happens when a stock decelerates, in which case you would want to short the stock, because it will head down faster and faster.
COMMENT
Uranium: - Very much a bull on uranium and feels it could reach $150 to $200 in the next 2 years. It had a large move this year from $72 to $113. Last year, the world's top 10 producing uranium mines all had production shortfalls. Current production only supplies 59% of annual consumption. New energy demand is growing at only 4 X the rate of new mineable supply. Excess stockpiles have been dwindling fast. New nuclear reactors have been growing dramatically.
COMMENT
Oil/Gas: - Most companies in this sector (including the service companies) suffered from a weak 4th quarter due to both a drop in the price of oil and gas as well as higher production and drilling costs. She expects Q1 to be soft and Q2 to be softer. Looking for a recovery in until late 2007 and early 2008.
COMMENT
Natural Gas: - Shorter term there could be some weakness as we head into a seasonal weak period. A key number to watch is natural gas storage. If it is at 1.4 trillion cubic feet on April 1, that would be bullish for the market. Because of less drilling, exports to the US have declined substantially. Medium to long-term, he is bullish.
PAST TOP PICK
Ford Credit maturing March/08. Although Ford is having serious troubles, this is the banking side which is still a great moneymaker.
Paul Gardner, CFAOwned
TOP PICK
Government of Canada 5.75% Bond 2029. Still believes that the real rates are dropping. In the last three years he has earned 13% to 14% return.
Paul Gardner, CFAOwned
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