GREY:WFEMF - Post by User
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74volframon Aug 10, 2015 6:27pm
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Post# 24004963
PCC, tungsten and merger
PCC, tungsten and mergerAbout Precision Castparts (PCC).
The Buffett acquisition of PCC is important because when Buffet buys something it means it is a bargain. He did the same with IMC, BNSF and a few more back when those companies were absolutely un-loved. PCC has lost a lot of value lately in spite of being a world-class manufacturer in many key technology areas. With this acquisition Buffet's Berkshire Hathaway has completely transformed itself from an insurance + services company into a world-class industrial conglomerate. Buffet is acting as a contrarian to the present market trends (social networks, software, luxury brands, cloud computing). He is usually very clever at picking up value at the bottom of cycles.
About tungsten price trends:
PCC uses plenty of tungsten in some of their product lines, which are mostly high tech. However tungsten and the whole metal sector are currently in a glut caused by the slowing down of manufacture in China. On the positive side, the big miners (RIO and BHP) have been rising lately from the abysss and a key specialty metal (Molybdenum) has shown signs of capitulation and bottoming. Moly has a much larger market and is a low price surrogate for tungsten in some applications, so it may be setting the trend. Specific to tungsten however, its price may also be held hostage these days by what is happening with the troubled FANYA metal exchange. FANYA has lots of tungsten in its warehouses and the possible liquidation of inventories keeps a lid on the prices customers are willing to pay these days. In my view, the FANYA threat has currently driven the price of tungsten below production cost levels. In a sign that the bottom may be close, the #2 Chinese producer China Moly will start building a large tungsten inventory (up to 1/3 of China yearly production) through market purchases in order to stabilize prices.
https://www.metalbulletin.com/Article/3468450/China-Molybdenum-to-build-up-commercial-reserve-for-tungsten.html#axzz3iRzzLudE
About Woulfe+Almonty merger:
- Status quo is not an option (deadlines coming up very quickly, old management gave up).
- Merger provides solid technical foundation and enough financial stability to get off the present dime and get going.
- I like the growth agenda of Almonty and actually would not mind to see other acquisitions in the future.
- There are no other offers on the table, let alone better ones. So I voted my shares accordingly.
- ISS endorsement of the merger is important independent confirmation: ISS handles a lot of the proxy vote for banks, hedge funds and institutional shareholders that have tens or hundreds different holdings that may be hard to keep track, especially small caps.