Tuesday, July 31, 2007 0 comments ++[ CLICK TO COMMENT ]++

My present interest

Here is what I am concentrating on right now.

Revlon (REV)

I removed Revlon (REV) from the main list of stocks I was tracking as an opportunity. I have some corporate governance concerns. The majority owner, Perlman, may own most of the bonds that are hampering Revlon right now. It is quite possible that Perlman may not care about the stock performance as long as Revlon keeps paying interest on the bonds to him. I took a quick look and I can't tell how true this is, but it is good enough of a concern for me to ignore Revlon as an investment.

Spectrum Brands (SPC)

SPC has been hammered in the last month (what else is new?) and is finally approaching attractive levels. The company is trading almost at book value now (according to Yahoo Finance numbers (need to confirm manually)). Needless to say, this stock will become attractive if it drops significantly below book value. The debt problems make this a very risky company, but I am attracted by the fact that they are in the consumer staples area, with some good second-tier brands.

Abitibi Consolidated (ABY; TSX: A)

I decided to put my analysis of Abitibi on the backburner for now. The shareholders have voted to merge with Bowater and most of the regulators seem to have approved the deal so that uncertainty is gone.

The main reason I am holding off is because newspapers are still seeing big circulation declines. The company is quite risky (and the stock price will likely decline) until newsprint consumption bottoms. The C$ has also appreciated a lot so the earnings picture is not going to be pretty. Since this is a potential long-term investment near-term earnings don't mean much, but I want some confidence that things won't deteriorate further. The biggest risk for contrarian investors and value investors are value traps. I need to be absolutely sure that this isn't a value trap.

Owen's Corning (OC; PK: OCWAZ)

Owen's Corning is going to be one of my big holdings at some point in the future. I am interested in the warrants that have a strike price of around $45 and expire in around 6 years. I am holding off because of uncertainty over housing (housing is going to continuously decline for years and I want to be sure that OC's earnings are stable). I want to buy when the market prices in a bad housing situation into the stock. The stock declined lately (likely due to housing slowdown) but the warrants didn't. My feeling (need to do a lot more work) is that the warrants will likely be profitable since OC simply needs to go up around 70% in 6 years (from say $30 to $50). You just need the stock to go up a little bit over 11% per year, which I think is achievable given OC's history prior to bankruptcy.

I have to read the warrant details more thoroughly but there is a possibility that the warrants end up worthless if OC is bought out below the strike price. I need to confirm this (I'll do this when I research this more thoroughly).

Montpelier Re (MRH)

MRH stock has declined quite a bit and is trading around book value (it had a 20% premium to book value a few months ago). I'm not sure if I should add to this stock or not. Ideally I would like to but I don't have enough money (this is what sucks about having a low-paying job). The decision is whether to start a new position in one of the stocks I mention here or to add to this. Not sure right now...

Key stocks for now

The stocks I'll be studying deeply next are:

  • Shoe Pavilion (SHOE) - the whole shoe industry seems to be suffering (look at FINL, FL, etc)
  • Guest-Tek (TSX: GTK) - I want to analyze this company before the stock halt is lifted and see if I should buy when it starts trading
  • Celestica (CLS; TSX: CLS.B) - Complicated to look at... with a whole hoard of issues... can wait on this

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