RE:BESIDE TEMBEC : HEADS UP ON.......TVA.B I'd never heard of this one, but the red flag that comes to mind is print and TV media is a scary sector. Remember Yellowpages income fund? People bought this b/c is was ‘so cheap!’ and the divi got pushed up to 20-some percent. It was a value play until it imploded since the rise of Google destroyed their business. The nostalgic levels of $7.00 for this thing likely don't apply. Why? Netflix. Amazon. Technology-driven sector disruption. In short, the thesis is not something I can get behind and could, after a one minute consideration, I would strongly advise my clients against. Even the majors like Time Warner are terrified and thus trying to get far bigger (merge with AT&T).
This is why Buffet looks for both undervalued (TVA prob is, granted) but also a clear, understandable investment thesis. Tembec has this -- on Lumber, SC, and Pulp Paper. Y’all probably know this by know. Why? Well, in case (1) the USA needs 1.5 million starts to break even for demographic demand. They are at 1.2 and having been running a deficient. This means pent up demand. Furthermore, the supply is messed up with the Quebec AAC clawback and the BC pine beetle. So less supply + more demand = good stuff. On (2), this is a steadily increasing demand in an oligopoly with huge barriers to entry. Good stuff. There are limitless applications and high margin. On (3) they carved out a niche. Pulp is scary too, but the co-gen now finally makes them cost competitive with the newer, larger mills. But to their credit, they carved out an innovative niche doing banknotes as I understand.
Who on the competitive horizon is coming to get TMB? Well, nobody outside of corporate raiders looking to break the firm up, but this is not bad (takeover attempts = huge share price increases). They don't have Netflix and Amazon about to ruin their business, thankfully. Don't compete with Silicon Valley, they will obliterate you by their endless money, brilliance, and exploitation of Moore's Law / exponential technology.
A crude take, but if I get some time I'll tidy up the language and write a piece for Seeking Alpha on what I understand the enviable thesis for the favorite sons of forestry, chiefly Tembec (the best 'value play' by a mile, Norbord (the perfect company: best mgmt, insane cashflows, can grow forever, huge innovation, a legimate global firm), and Interfor (USA south, all the way). Iam long Norbord, and will get back into IFP when I double or triple (or quadruple or whatever the next one is) my Temebc investment. I can generally leave the rest of them and have some major disagreements with how WEF, CFP, CFX, RFP, WFT are run and how they execute. The two majors of the batch CFP and WFT are never 'bad' picks but I am find their strategy conservative, cautious, and tone-deaf. Also insular and myopic. Just sad, in sum. I left a fairly scathing note on the WEF bullboard as of late because those poor dudes love that company and all think it’s worth a fortune but it’s clearly fully-valued.
Anyway, that's my world view. Hope you all steer clear of TVA or Shaw or Rogers or any of the game outside of an ETF or something but it's too small to factor I think at only 100M.