Yellow Pages Limited (Y.TO)

Owns a little, but one that he is hemming and hawing on. He was more bullish on it a couple of years ago because it was extremely cheap. The question is whether it is a value or not. He is sitting on the fence, and is more likely to move on then to stay with it. The attraction is that it is trading at 3X earnings, but it is not growing. The issue is how fast new digital businesses can replace the legacy businesses. This would have to acquire something to become a more interesting story.

A controversial stock and maybe one that people don’t pay much attention to anymore, because it fell on such hard times. Have been undergoing a major transformation of shifting from print to digital. More than 50% of their business is now digital. Trading at a very, very low valuation multiple. Some risk, but a lot of reward.

8% convertible debenture maturing in 2022. Digital is now 55% of this company’s revenue. This is a bond that you can get a 6% rate of return, but you get some upside from the stock which is trading at about 3X EV to EBITDA, and should be trading at 4 or 5 times. The key is paying down their senior debentures which is ahead of convertible debentures, but it is going to get to a point where there are no senior debentures left, with the only debt outstanding being the convertibles. With that you are not only going to get this secure yield of a business that is doing all right, but maybe some upside. You don’t want to pay more than $115 for the bond, because the bid/offer spread is quite large.

Owned this when its executives were being overpaid. It was a big loser for him. He had gotten caught up in getting a really good dividend. When dividends are too high, it is a warning sign. They have been transitioning. Did a huge stock consolidation. Doesn’t know the financials well enough to really speak to them. This is a play that you really have to take a good look at the financials and a good look at how quickly you think their digital area is going to continue to grow. How often do you actually look at the Yellow Pages?

A better company than it used to be as it switches to digital. It is still speculative, however. There is no certainty that they will survive.

Has a small position. Telephone directory book business is dying while online digital business is growing. Stock is trading below BV, so he likes it, but it is not performing.

Likes the fact that digital businesses are overtaking paper businesses. Balance sheet looks pretty strong. Not ready to back up the truck as he was to see a few more quarters. There have been some changes in management. This is one he is prepared to grow into but wants to see another quarter. If the quarter looks great, he’ll buy a bit more but will then want to see another quarter.

Has done pretty well. Is beginning to consolidate a little. If it breaks $25-$26, it might be bullish, if it breaks $22-23 he would be concerned.

Has been a great story. There is some accumulation going on by some bigger players right now. As soon as it breaks the troughs in the trend line you might consider getting out.

This is one of those stocks that nobody wanted to hear about. It has now bounced back because they do have pretty prodigious cash flows. The problem is, can they take that dwindling stream of cash and reinvest in something that is more sustainable. The directory business is not sustainable. If you own and have done well, ask yourself if you think they can turn things around by taking the cash, invested in new businesses and new lines of digital income and keep the value.

Played it three times and got killed the last time. You really have to think about how far it has moved. How many people are going to use their media and how much is their digital media growing.

This was a disaster about a year ago and now there are some signs that the company is trying to invent itself with the new CEO. There has been a breakout with volume on it. For a high risk play, it looks okay. (He owns their bonds.)

Stock has done very well. Had the restructuring and the consolidation. There is a big group of unhappy former shareholders that didn’t end up with anything. The model has changed and the competitive situation has changed. They might make some money but in terms of a compelling investment, he couldn’t buy into this one.

Declining core business. Doesn’t see where they will be able to generate enough cash flow in the long run to pay all their debt.

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He was a debt holder before the restructuring. He sold the equity and the convertibles, but holds the debentures. Print media is collapsing although not going down as fast as analysts had predicted. It has restructured into a company with a rational balance sheet. He likes the bonds but the equity is fully valued.