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ABH - Abitibibowater Inc.


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Guest Quebec

Looks like 10 millions shares traded on the US listing of RFP today. If not a fluke, that's 10% of the float. Anyone with a guess about what's going on ? (Hold some from fibrek buyout)

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Guest Quebec

They did not get 90% on the second step vote to privatize Fibrek. They got 88.18%. I doubt this relates to the stock price drop but wonder what they'll have to do to complete the deal. I believe they needed 90% to compulsory force the remaining shareholders into accepting the offer.

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Fairfax is still buying RFP shares and now owns nearly 25%. Resolute has been buying back shares as well.

 

http://sec.gov/Archives/edgar/data/915191/000118143112063817/xslF345X03/rrd363055.xml

 

Fairfax hasn't been buying. Some of their pre-bankruptcy filings claims have finally been converted into shares. That said, this is a meaningful position for them.

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From my anecdotal evidence, most real estate folks I talk to say that supply of housing (to sell) is very low in the southeast.  They also note that construction of new housing is picking up.  Maybe lumber prices will stabilize, but contingent on a possible recession in '13 though if the US fiscal policy has drastic cuts (i.e. reference the Richard Koo thesis).

 

Cheers

JEast

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One never knows, but would think that the government/union/pension ties are too much for FFH to take on as a wholly owned company.  Irrespective, I think the current management is moving at full steam in the right direction and is one of most undervalued stocks, outside of Japan, around.  Of course, if we run into a recession next year it will languish but the downside risk looks worth the upside potential.

 

 

Cheers

JEast

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Guest hellsten

Irrespective, I think the current management is moving at full steam in the right direction and is one of most undervalued stocks, outside of Japan, around.  Of course, if we run into a recession next year it will languish but the downside risk looks worth the upside potential.

 

I haven't been following RFP very closely. I'm now thinking maybe I should. Can you briefly explain the investment thesis for RFP? RFP at P/B 0.4 seems cheap compared to competitors.

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RFP is the security I like most!

 

Here are my notes from 2 months ago when I decided to grow it into my largest position. I had been following it for what seems like forever. (Heck, SFK had yet to be spun off!) The issues brought forward are always the same: pensions, unions and newsprint but there has to come a price where it's priced in right!

 

Fairfax,Steelhead, Chou, Smith shareholders

Fairfax adding recently

.33 of book

Cleaned up book following bankruptcy

Low debt, paying debt

Buying back

Construction turn around

Got fibrek cheap, hydro going online

Got dolbeau cheap, hydro going online

Pulp turn around

Newsprint stable

Major fiber access

Peer stock rising

Garneau seems on a mission

Ignored sector

Being sold by retired employees

Being sold by former debt holders

Tax loss selling

No divi, cheap, Hated, beginning uptrend

Concentrated shareholding makes takeover easy

 

It should double from here and then we'll value from the results as they start and recurs. Might be a multibagger!

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RFP is the security I like most!

 

Here are my notes from 2 months ago when I decided to grow it into my largest position. I had been following it for what seems like forever. (Heck, SFK had yet to be spun off!) The issues brought forward are always the same: pensions, unions and newsprint but there has to come a price where it's priced in right!

 

Fairfax,Steelhead, Chou, Smith shareholders

Fairfax adding recently

.33 of book

Cleaned up book following bankruptcy

Low debt, paying debt

Buying back

Construction turn around

Got fibrek cheap, hydro going online

Got dolbeau cheap, hydro going online

Pulp turn around

Newsprint stable

Major fiber access

Peer stock rising

Garneau seems on a mission

Ignored sector

Being sold by retired employees

Being sold by former debt holders

Tax loss selling

No divi, cheap, Hated, beginning uptrend

Concentrated shareholding makes takeover easy

 

It should double from here and then we'll value from the results as they start and recurs. Might be a multibagger!

 

I am a holder as well, but one has to remember $0 is always a potential right price! These guys own a lot of buggy whip assets with their paper machines. The faster the transition from paper to market/specialty pulp and sawmills the better!

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I am a holder as well, but one has to remember $0 is always a potential right price! These guys own a lot of buggy whip assets with their paper machines. The faster the transition from paper to market/specialty pulp and sawmills the better!

 

We just did $0 ;-) And lets not forget power and pellets along for the transition. There's a lot of value in our huge and renewable fiber resource but I agree the transition has to continue at a fast clip. Maybe some day Pulp&Power will be more accurate than Pulp&Paper!

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Recognize that this is a turnaround and 9 out of 10 turnarounds never turn.  However, I like what management has done over the last 18 months given the difficult decisions that needed to be made. Zero is always a possibility, but at the present price the downside looks limited compared to the upside potential. This guy is an ugly duckling now but reason for the undervaluation.  Come 2014 after a few more realignments, this equity may have some staying power with only a minor rebound in construction. Plus, any weakness in the Canadian dollar will go a long way too but not priced in yet.

 

Cheers

JEast

 

Disclosure: Long RFP

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Recognize that this is a turnaround and 9 out of 10 turnarounds never turn.  However, I like what management has done over the last 18 months given the difficult decisions that needed to be made. Zero is always a possibility, but at the present price the downside looks limited compared to the upside potential. This guy is an ugly duckling now but reason for the undervaluation.  Come 2014 after a few more realignments, this equity may have some staying power with only a minor rebound in construction. Plus, any weakness in the Canadian dollar will go a long way too but not priced in yet.

 

Cheers

JEast

 

Disclosure: Long RFP

 

Now at $391.60 on lumber. $180 million increase in annualized EBITDA off of Q3 run rate.

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The increase in lumber prices is nice, but wonder if it is just temporary with the Sandy rebuild.  Hard to think housing in the US will continue to rebound with austerity in the cards (increased taxes and reduced state spending) on the way in 2013.

 

Cheers

JEast

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Guest Quebec

You might want to look at all the transactions in Q4. Most would expect at least one or two unexpected write-offs to lower the cost base - & set up for a better 2013  ;)

 

Agreed, I think Q4 will disappoint and we may get a dip. I've sold a third of my position and hope to reload in the 12.xx (I remember you managing to do this with success on fibrek and will give it a try!)

 

Meanwhile, I was hoping that RFP would try to snatch FTP (Fortress Paper) when it was deep in the dump but that is getting more expensive every hour.

 

RFP is still my largest position, while FTP is my second largest.

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You might want to look at all the transactions in Q4. Most would expect at least one or two unexpected write-offs to lower the cost base - & set up for a better 2013  ;)

 

Agreed, I think Q4 will disappoint and we may get a dip. I've sold a third of my position and hope to reload in the 12.xx (I remember you managing to do this with success on fibrek and will give it a try!)

 

Meanwhile, I was hoping that RFP would try to snatch FTP (Fortress Paper) when it was deep in the dump but that is getting more expensive every hour.

 

RFP is still my largest position, while FTP is my second largest.

 

The stock is trading ~$14, could be worth $40+ under right circumstances and you are worried about picking it up at 12.xx versus current prices...appears pennywise pound foolish!

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Guest Quebec

The stock is trading ~$14, could be worth $40+ under right circumstances and you are worried about picking it up at 12.xx versus current prices...appears pennywise pound foolish!

 

You may well be right, and I run the risk of being humbled right here! This position became very large because I had dry powder and conviction to average down in 2012. Now it's back to large, with a nice cost basis, and some money for wait&see.

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