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https://www.morningstar.com/articles/996448/a-scandalous-and-undervalued-stock-pick

Franks International NV (FI:NYSE) is small cap value stock and a leading provider of casing and tubular running services, an important part of the construction of oil and gas wells. I generally put oil & gas stocks in the "too hard" pile; however, I'm been looking to add some exposure there for diversification. On the positive side, FI gives you exposure to rising oil prices, insider ownership > 50%, business arguably has a moat, and the stock appears cheap. Looks like it will hit 52-week low today. My primary concern is how long (if ever?) it takes for deep-water markets to recover. Looks like an interesting idea, but unfortunately, this one is not in my circle of competence.

For those who have been following PM, does it make sense to reunite it with MO? It seems like one of pm’s largest headwinds in recent years has been currency issues; however, I like the idea of using it to offset my US centric investments. Does the combination make PM more or less attractive to you? I’m currently on the fence, leaning toward less interested, but am seeking input from those with more knowledge of pm and no. Are there any benefits to combo outside of combining head office, the new company having total control of pm’s noncombustible products in US market, and smoothing our currency issues?

It looks SHOS also filed an "AMENDED AND RESTATED MERCHANDISING AGREEMENT" with SHLD on 05/17/2016. I've heard it contains reduced restrictions on SHOS with regards to internet sales and working with other sources of inventory; however, I haven't gone through the Amended Agreement myself yet.

Does anyone have insight on today's filing? https://biz.yahoo.com/e/160525/shos8-k.html The filing raised questions for me such as: Why are they selling this property? Does this represent short term thinking to resolve the issue of the property being listed on the balance sheet at such a low value? Is this good news for long term holders?

Does anyone have insight into the store count and its significance? Increasing store count has been part of management's narrative; however, if you look at the management presentations for 2014 vs. 2015 (see attached), they don't appear to be making much progress. Here's what they are showing for store count (See 2014 slides 11 & 18 vs. 2015 slide 8) Total 1260 (2013) vs. 1260 (as of 01.31.15) Hometown 1117 (2013) vs. 926 (as of 01.31.15) Outlet 143 (2013) vs. 151 (as of 01.31.15) Interested to hear what others make of the store counts. I frequently see press releases about store openings, so what explains the lack of growth in store count? Are they having issues keeping franchisees? Are they closing underperforming company-owned stores? SHOS_2014.pdf SHOS_2015.pdf

It seems like a miner or Oil E&P that owns a mine or similar access to a useful resource can have a nearly impenetrable moat if the mine or other source places the company at the low end of the cost curve AND the mine has a long life. However, value investors and, more specifically, those who follow the "Munger" strategy of being a long-term investor in quality companies appear to steer clear of such investments. What are the reasons for this? High capex? Depleting resource issues? Difficulty of getting management to restrain growth to only such low cost opportunities? Volatility of commodity prices provides too many opportunities for management error in capital allocation decisions? Difficulty in replacing such low cost reserves? Anything else? Looking into BHP Billiton is what raised the question for me personally (although I don't have an opinion yet as to whether BHP falls into this category). Interested in how others view this issue and eager to understand the issue more clearly. If you follow a Munger-type strategy, would you even consider such companies? Why or why not? Please focus your comments on companies that have access to cheap, long-lived resources.

I got an answer to my question quoted above that I found very helpful. Here is the response I received: Interesting parallel and statement by one of the world's most highly regarded investors! Do these companies use the same wood source for all of their products? Is there any way RYAM can adjust to a cheaper source or are they just stuck with their more expensive sources due to the location of their facilities? No. Different wood is required for different end markets. Per my research, acetate (80% of RYAM's revenue) requires hardwood. Bracell (fka Sateri) is vertically integrated into eucalyptus (a type of hardwood). RYAM is not integrated and sources hardwood from third parties (sourcing radius limited to 100 miles due to transportation costs). See RYAM's latest IR deck. Eucalyptus takes 7-8 years to grow; hardwood that RYAM relies on takes 30 years to grow, so even if RYAM's suppliers can grow eucalyptus, that is unlikely to help for several years. With respect to dollars and cents, RISI's December 2014 World Timber Monitor shows that Brazilian eucalyptus trades at a 35% discount to US South hardwood (see p. 6 and 13 of this pdf: http://bit.ly/1FH4thW). You'll note that this pricing was as of December 2014. Since then the Brazilian real has depreciated by 25% vs. the USD. You can also see this difference in Bracell and RYAM's financials. In 2014, Bracell produced 435kmt of dissolving wood pulp and reported a cost of sales of $240mm (reported $300mm less $60mm of depreciation in COS). Same figures for RYAM are 627kmt and $648mm. Thus, Bracells cost of sales was $550 per ton and RYAM was $1,030 per ton, nearly 2x Bracell. RYAM's greater CS mix (versus Bracell's more commodity mix) accounts for ~$100 per ton of the difference, so clearly, Bracell has a much lower cost position.

04/02/2015 investor presentation attached. Page 6 indicates that current market value is "well below replacement cost of assets." Investor_Presentation_040215.pdf

I have heard comments elsewhere that Bracell (Sateri) has a competitive advantage v. RYAM due to access to cheaper wood inputs. Would be interested to hear from anyone with insight into this issue. The comments about Sateri having cheaper inputs reminded me of something Charlie Munger supposedly said about Berkshire Hathaway when it was still in the textile business: "[The] textile business in New England… was totally doomed because textiles are congealed electricity and the power rates were way higher in New England than they were down in TVA country in Georgia. A totally doomed, certain-to-fail business." I'm trying to figure out how serious an issue the cheaper inputs are for RYAM, how sustainable an advantage it is for Sateri, and what, if anything, RYAM can do to address the issue.

I've faced the same issue. Packer16 's comment about what you can and can't control was awesome. I wish I had thought of that! Wish we could +1 comments on here without using facebook.

In May 2014, RYAM and its Chairman / CEO entered into a retention award agreement whereby the company awarded $4 million in stock and accumulating dividends with interest to the CEO. The award was contingent on continued employment and was set to vest on 08/31/2018 or upon a change in control. A Form 4 was filed yesterday (see attached pdf "stock award amended") for the Chairman/CEO. The filing states that "On March 23, 2015, at the Compensation and Management Development Committee's direction, [the CEO's] retention award agreement ... was amended to convert the guaranteed value RSU award described in the Agreement.... The award, as amended, will vest and become payable solely in cash, at the same value as the original award, on August 31, 2018." I've attached what I think is the retention award agreement referred to (See attached "stock award'). The prior award was based on the stock price last year. Since the stock has tanked since that time, isn't the board simply giving the CEO over a million dollars for no real reason (other than that the stock has gone down a ton)? For those of you who are more familiar with these issues, is this a common occurrence or an alarming indication of poor stewardship on the part of the board? They simply seem to be giving away over a million dollars for no legit reason. UPDATE: I spoke with Inv Relations regarding the amendment to the retention agreement. Per IR, the issuance price for the $4 million in stock is based on the price when the award vests in 2018 not based on 10 days of trading after the new RYAM stock was issued in 2014. Based on what IR said, the CEO is getting $4 million either way: in Aug 2018 he gets $4 million either in cash or stock at the Aug 2018 price. This IR interpretation of the issuance price isn't clear to me for two reasons. First, its not clear based on the attached document (assuming I've identified the correct award agreement). Second, this interpretation provides no incentive for the CEO to increase the stock price. If the purpose of the award agreement is to motivate the CEO to stay with the spin off and grow it, wouldn't it make more sense to base the award on the 2014 price and not on the price when the award vests in 2018? If its based on the 2014 stock price and the price goes up, he potentially gets a lot more money. stock_award.pdf stock_award_amended.pdf

Morningstar just precipitously dropped fair value on RYAM from $36 to $22. The 03/25 analyst report also indicates that they've "transferred coverage" to another analyst. It seems like Morningstar frequently does that when they make a really bad call. I've also seen Morningstar drop coverage of a stock after making a really bad five star stock call, which is horrible timing for subscribers who are trying to figure out how to respond to the steep decline in price. Does anyone else agree or know why they do that (transfer analysts or drop rating) other than the obvious reason which might be to wash their hands of the bad call? It seems like M* really dropped the ball on this one. Here, they gave RYAM a $36 fair value, a narrow moat, and a five star rating. Its lost 50% while having a five star rating and NOW they say its really a $22 stock with NO MOAT. Report says "moat trend" is stable but there is concern over COMPLETE loss of third largest customer and entrance of new player, Bracell, which has "long possessed" the ability to toggle between commodity- and specialty-grade products.