Reading VInvesting, I see this Globe and Mail piece on veteran money managers buying forestry stocks. The sector is battered. And that's why you'll see that many of the "usual suspects" of value investing are mentioned in the article, among them Cundill and Third Avenue.
Regular readers of Controlled Greed.com know that I don't own any of these stocks directly -- and I might be making a mistake in not doing so. I do have indirect (and I'd imagine tiny) exposure through owning Fairfax Financial (FFH/NYSE):
The value hounds are also sniffing at pulp. Fairfax Financial, the insurance conglomerate headed by deep-value buyer Prem Watsa, owns about 20% of SFK Pulp Fund, including convertible debentures. Since hitting bottom at $3.60 in November, SFK's unit price has climbed to more than $4.50, and the income trust has resumed paying monthly distributions.
You can get a British perspective on this sector in the latest Spectator. Where the Globe and Mail article focuses on the sector being beaten up and in need of consolidation, The Spectator's article talks up the notion of China and India fueling future demand for timber products.
That may well prove true. But my experience has been that investing in sound companies in unpopular industries with a long-term view is the way to go. At least for me. So, if I buy any of these stocks, it won't be because of projected Asian growth.
Some examples of this for me include Imagistics International, a reseller of fax machines. Click on its name in the "Closed Positions" menu at the right for the story with that one. The company had a bum future -- fax machines being most of its business -- but got taken over for a nice profit. We've also had a good run in old media companies that were ignored a year or more ago. Think Comcast, CBS, Liberty Media's tracking stocks.
Buy unloved companies, with good finances, and wait. It might take several years for the masses to come to them, but you'll profit from your patience. Of course, some would argue that General Motors (GM/NYSE) and Fairfax don't have good finances. We'll see.
If you enjoy Controlled Greed.com and the unloved stocks reported on here, will you do me a favor and recommend this blog to three friends or colleagues today? I'd greatly appreciate it. And anyone can subscribe to the RSS feed here.
I must tell you that I throughly enjoy your website. I haven't posted before because of time constraints. But I read you every day. I, too, am a big Merryl Witmer fan. I'll try to pass the website on to a few people, although I don't really talk to too many of my friends about investing.
Posted by: Steve Spencer | February 23, 2007 at 01:05 PM
The best strategy is to yours where you worry about the value and let the timing take care of itself. If you're buying a $0.50 cent dollar you have about a 5 year time from to get that double which is plenty of time, and you'll still handily beat the market averages.
Forestry is interesting but I've heard it's fairly valued from some experts in that area, notably Grantham. He's sort of a perma-bear but he's always had an affinity for timber and has a fund that directly buys timberland. He's stated he sees that asset class as fair to overvalued recently.
One stock to check out is Timberwest in Canada. It was an income trust, got battered and quickly rebounded. I find it more appealing than the typical timber ideas like Rayonier, Weyerhauser REIT conversion talk, etc. with better valuation. Sino-Forest could be interesting too.
Posted by: Amit Chokshi | February 23, 2007 at 05:41 PM
Steve: Thanks for reading so regularly. And I can relate to the idea of time contraints!
Amit: Thanks again for yet another insightful and informative comment.
Posted by: John | February 23, 2007 at 07:07 PM