Value in plain sight I've been investing since 1995. My return was 75% in 2020 mostly as a result of concentrated positions in Boralex, Innergex, and increasingly buying Canfor Pulp. It was hard to let go of my great renewable power producers but the valuation by year-end (15X ebitda?) was priced to perfection, in my opinion. An unexpected event, mood swing, or simple rate hike was bound to hit them. No fault of their own, just investors enthusiastically pricing them such.
Canfor Pulp on the other hand is priced unbelievably cheap! And safe! It has just about no debt. It has recurrent demand for nbsk pulp tons. Deep value based on numbers rationale. What is it gonna be , 2.5x ebitda!! You have to consider longer term averages, not just last year negative.
The story is good too: green, natural, renewable, plastic alternative, demand growth, tight supply, surging prices, multiple export markets, etc. It's growing along with more tissue usage in developing economies and less good recycled available.
Yet I can see that no buyers shows up. It's so under the radar that it seems on purpose. Shares are shuffled between few houses and hardly ever leave them. Cibc, Morgan, and most notably Anonymous. It seems to me like accumulation, with the price kept in check. Whenever a domestic house such as royal, bmo, td, scotia, national, desjardins, etc buy in some size the price has to move up (before riding back below your price to install doubt!)
Be patient, hold, even if the price action is counter-intuitive. Value is there. Value is what you get, price is what you pay.
https://www.thisismoney.co.uk/money/holidays/article-3131850/Value-hidden-plain-sight-Dull-stocks-boost-portfolio.html
Why am I explaining this opportunity over and over, why not just buy?
Buying, I have been, more and more, going way above sensible concentration levels, but not leveraging using margin/debt (That could be the next step with a mortgage ;-) I am loaded with shares, nearly as much as Mans. What bothers me is the disconnect with the trading price of shares and the value of the business. It is far too wide. Price should double to be in the ballpark. This exposes us to a low opportunistic take-under. An offer with a cute premium above recent trading prices could be welcomed by uninformed shareholders or shareholders aligned with the acquirer. It's happened to me before (fibrek) and I made just a fraction of the deserved profit. We minority holders could have value stolen from us this way. It's why market value has to be closer to intrinsic value, sooner than later. It would help to have some meaty investor relations material (like mercer does so well), but maybe it's their intent to remain obscure and undervalued ??
A take-over with a fair price would be fine by me, especially if we are offered payment in shares (not cash-only) to continue along tax-free. I would love a Mercer offer. Or a CFP offer, but then there is potential for abuse on price.
A meaningful regular dividend would be tremendous and expected from a cash cow, but the numerous opportunities to hike it were never taken. On the contrary, at first fright they dropped it! This is telling and one reason why we are under radar.
Seems like no one doing simple math on ebitda or earning multiples. If you estimates forward 1.50 net earnings average then it's a 6 p/e, i.e. an 17% net earning yield with an un-leveraged structure, in a 2% world ?
Regular div, special div, buyback, buyout, some catalyst has to happen with the solid cash earnings coming back.
Be ready!