Can Turtles Fly?

AbitibiBowater, a North American newsprint giant, declared bankruptcy after strugggling under a mountain of debt and declining newsprint consumption, particularly by newspapers. I was tracking the company as a potential investment for a while and it's a good thing I never invested. Several value players such as Fairfax Financial and Third Avenue Value have lost a bundle on this company. Canadian contrarians running the ContraTheHeard newsletter (I have never subscribed to it) also lost out big. I remember watching the Abitibi merger with Bowater two years ago and thinking how ridiculous it was at that time. Two struggling forestry companies with very high fixed costs and large debt merging together didn't seem like a plan for survival. Indeed, it never was much of a plan it turns out. As is almost always the case these days with mergers of any sort, insiders and executives made out with golden parachutes even though they largely retained their positions. I think the company wi...

I have been tracking Abitibi (NYSE: ABY; TSX: A) for a while now. Canadian forestry stocks, newsprint in this case, have been struggling mightily for years. It's totally out of favour but risks are high. There seems to be no end in sight for the newsprint consumption decline. In fact, I'm going to wait and see given that the newspaper industry is still posting some horrible numbers. Newspapers are facing their worst crisis since The Great Depression and it's not clear that circulation decline will end any time soon. With the housing decline, real estate ads, a big chunk of their ad income, are falling. As long as circulation keeps declining, I think the newsprint forestry stocks will face difficulties. I haven't looked deeply at the newspaper companies but that's another contrarian area. The fortunes of the newspapers and the newsprint industry will rise and fall together. One reason I don't like the newspaper industry is because their valuations are still high....