AbitibiBowater Inc. (ABH.TO) Buy, Sell or Hold

AbitibiBowater Inc. (ABH.TO)

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2 watching

DON'T BUY

Pulp and Paper is a really beaten up sector, and you should be able to buy the bonds, but they aren't paying high enough esp with the Canadian dollar so high. Pulp and Paper is profitable in Brazil, just not here.

COMMENT

Merging with Bowater (BOW-N). Both companies are having a lot of problems and losing money. Merger will do well. It's possible they could go bankrupt, but he is content to continue holding.

PAST TOP PICK

(A Top Pick Sept 14/06. Up 10%.) Merging with Bowater. It's going to be a long and complicated haul. Still likes.

BUY

Will be a much stronger company with the merger. There will be adjustments. Has a ways to go before all approvals are in place. Sector is way out of favour, which is why he likes it.

DON'T BUY

Everything is going their way right now, but there is too much risk. Has an enormous amount of debt.

COMMENT

Merging with Bowater (BOW-N). Tough industry and to survive, they have to get bigger in order to get costs down. We'll have big revenues and potential synergies of about $250 million. Doesn't like the sector.

SELL

Has had a nice little pop here. Would take the money and run. #1, you've had a tremendous move in a very short period of time, #2 the two companies are going to have to face antitrust issues and #3 newsprint is a lousy business..

COMMENT

Proposing to integrate with Bowater (BOW-N). Has been struggling for a long time and has had a heavy debt burden. This may result in a stronger company going forward.

DON'T BUY

Very tough industry requiring a lot of capital expenditure for development of plants. Paper/forest industry was a disaster last year. Facing a lot of pressure.

COMMENT

Made a lower low in December than what it had in August. Looks like it is forming a base. Will it take out the high? If it does, there could be a structure of a bottom forming. There is a possible set up for a technical trade.

DON'T BUY

Owns the bonds rather than the stocks. Recovery could take longer than you think. Really cheap. It is the one the turn-around investors will start buying because it is the biggest and most liquid.

SELL

Forest products is still a difficult place to be. Housing is slowing down. Newsprint is not great.

DON'T BUY

The paper market (forestry) is where you should find the bear market (deals) right now. However, the paper market keeps grinding down. Got hit with the rising Canadian dollar, higher electricity costs, etc. which makes him nervous. He can’t see visibility a few years out.

BUY

Started looking at this. Has a market cap of about $1.2 billion. Have power assets that are generating 544 megawatts which would be worth around $1 billion.

COMMENT

A bit of a teaser. Trading at an exceptionally low price. Struggling, but has terrific assets. Canadian dollar is coming down. Speculative. An alternative might be Canfor (CFP-T).

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AbitibiBowater Inc. (ABH.TO)