Opinions
Malvin Spooner
AbitibiBowater Inc.
ABH-T
BUY
Jan 31, 2002
The acquisition of Donohue was a good move. Cheap.
$12.720
Stock price when the opinion was issued
east coast forestry
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COMMENT
All newsprint players have been decimated, specifically those in Canada whose costs are in Cdn$’s. Has BV of about $25 with a terrible balance sheet. If a company can pay its banks when the commodities are low they have massive leverage when commodities improve. Newsprint inventory is down 25%, largest decline in 30 years. It could earn $8 a share and at $17, in 4 years you could be paying 2X earnings. Needs to do more work, but it fascinates him.
east coast forestry
DON'T BUY
Now closing Canadian plants because of high costs and keeping US plants. Forest products industry has been much more disciplined about bringing on new capacity and closing low capacity. Stock price has been abysmal and some smart investors have been buying lots. If you believe that every commodity will have its day in the sun, wait for it to start moving.
east coast forestry
DON'T BUY
He has been short this stock on and off since he started his fund. Although he is not short at this moment, it is still in the short camp. Earnings continue to go down because newsprint demand is going down. The slowing economy further accelerates its decline. Strong Cdn$ increases their cost structure.
east coast forestry