oldye

He likes the AIG brand? What a joke.

Berkshire has some very large unrealized gains on some of their other stocks so you won't see them sell unless something materially changes about the companies. Unlike JnJ where they had no unrealized gains coupled with the fact that JNJ gets 40% of revs from pharma, 31% of operating profit, from what is essentially intelligent speculation that costs 4-5 billion dollars each year in R&D. Take a look at their future pipeline of drugs: http://files.shareholder.com/downloads/JNJ/878167992x0x345048/f43507f5-0f3a-48b5-a101-98e2b79ec03a/Q42009pipeline.pdf I'm sure Warren Buffett has no clue what drugs will be successful and how much they'll be making from pharma 10 years from now. Remember that JnJ is only cheap if you consider these earnings recurring, while likely are not nearly certain! Also I'm not sure where you are looking but JnJ has about 18 billion in cash and they can always use their stock for acquisitions, you don't have to worry about that when you control the company. It'll take a while for Berkshire to generate 8% free cashflow from the purchase price of BNI but like most of his acquisitions they'll eventually get there.

Canfor doesn't have any permanent advantages over SFK, they're on the West where woodchips cost less due to the beetle infestation which allows them to enjoy a temporary competitive advantage. It costs more than 20-30$ per ton to ship them east so I don't think about synergy, I think income trust investors want dividends and that explains the difference in market value.

"what will fix this?" As Ken Peak once said, the cure for low prices are lower prices! Although it probably wouldn't hurt if Ukraine and Russia were to go at it again.

I like to think about the company as if the conversion will dilute by 20% or roughly 108 million shares outstanding. Assuming conversion after Q2 net debt should be around 100 mil. If you buy/hold(not an endorsement) at 1.40 you own the rbk mills (150 mil bought from bankruptcy 20 mil ebitda +-)+ working capital+ 360,000 nbsk mil. At the current price, Mr. Market is selling the nbsk mil+working capital for 65 million, 180$/ton..when replacement cost is north of 1200$ per ton. The nbsk mil is old but its well maintained and worth quite a bit more. I never invest expecting a buy out, I think there is a healthy MOS up to 5-6x normal ebitda which is about what it would sell for out of bankruptcy. Who knows how long it'll take Mr. Market to fully value a stock, I think it can take way more than 3 years but there are certainly some near term catalysts that should be beneficial. SFK's profits are more than a simple function of the price of nbsk, if the can $ was at parity, 750$ nbsk price things at SFK would get kinda hairy. But who knows, maybe wood chip prices would fall.

My guess is that Fairfax is more than 150 million dollars underwater on their hedge...might be a good time to buy some protection..any ideas?

http://www.vancouversun.com/business/Chile+earthquake+boosts+pulp+prices/2687711/story.html "When you get a surprise move like this, the weakest players get the biggest bang for their buck. And right now the Canadians, financially, are generally the weakest players on the world stage. They are the biggest beneficiaries from this run on pulp. It's going to buy them time to repair their balance sheets and generate a huge amount of cash." Mason said he's hearing tales from brokers that buyers are phoning and asking how much more they have to pay to outbid other customers. "A lot of people are scrambling and they are willing to pay more than the current price."

To his credit Aig is the ultimate contrarian investment, I mean the smart risk taking culture, shareholder oriented management and margin of safety, this company has none of it. The debt might get paid but the common is a lottery ticket. Last 10 years worth of reserve adjustments (deficiency): (16,016) (20,711) (24,606) (23,071) (19,556) (11,425) (4,286) (2,409) (2,601) (2,771) Based on the current size of their reserves,Aig is a typical zombie insurer, that has only retained business because they've been competing on price...they still have 150 billion in notional credit default swap exposure thats currently marked to expire worthless but as we know could have interesting surprises.

Wow...this thing had a market cap north of 500 million in 2007, as of Q3 had 6 million on hand, 37 million in revenue and no debt

I don't think he means that they won't pay a 10$ dividend again, they will probably continue to issue a high dividend during years when Fairfax earns a very satisfactory return on equity.

http://www.paperage.com/2010news/03_04_2010finland_strike.html

http://www.marketwire.com/press-release/Canfor-Pulp-Income-Fund-Announces-Maintenance-Outage-TSX-CFX.UN-1126202.htm

http://www.glgroup.com/News/Chilean-earthquake-could-cause-pulp-supply-crisis-and-escalating-prices-46892.html

China and India are importing more than 1 million tons of pulp each month, Chinese people love paper and in 2010 they will be making more of it, as their incomes go up they will use a lot more than they do today. During the 20th century paper use in America went up 10 fold, I expect that they'll see decades of 10% growth that should more than offset the decline in mature markets. Their RBK plants should benefit from access to lots of waste paper as all this stored paper is slowly digitized. Since 2005 growth from emerging markets has been enough to keep worldwide demand for hardwood and softwood basically flat but demand for softwood has fallen from 29% to 25% of the total. As North American demand continues to come back there will be a lot of pressure to get back to higher levels of production we saw in 2005. The Canadian mill is old so capex will be different from year to year; this year they expect to spend 13 million, last year they spent 3 which is probably the bare minimum. If you notice last quarter they reduced working capital significantly; pulp fiber and waste paper are all below 1 month inventories.

Right now nbsk inventories are tight "market remains tight and spot volumes have virtually disappeared with weather and maintenance downtime eating into supply and with some of the largely integrated companies now trying to buy pulp" Starting March. 1 suppliers are pushing the price up to 910$ per ton, eventually additional capacity will come online but its tough just look at the proposed gunns mill people are afraid that prices will come down before they can cover their cost of capital. I'm not so sure costs haven't gone up so I'm not as optimistic as some but In the issue management states that current prices are at the same level they were Q3, 2008...costs are different but they generated 9.3 million that quarter. I think long term 2.5 billion people in India and China are going to increase their demand for paper by 10% a year or roughly India's current consumption of paper every single year. In order to match that demand billions of dollars will need to be invested in pulp mills, now for that to happen prices need to remain high. Its just as likely that prices go up to 1,000$ per ton as 800. On the other hand, wood chips become more plentiful as demand for lumber goes up so costs can come down a bit. I' guessing that a 5$ drop per ton increases net earnings by 3-4 million. During Q4 their average sales price for nbsk was 721$ a ton, RBK was 625 that generated a 12 million dollar (pre-tax) loss ... they probably need something around 780, 685 to make money.

http://canmetenergy-canmetenergie.nrcan-rncan.gc.ca/eng/industrial_processes/industrial_systems_optimization/news.html?2010-02-25-1 Looks like there will be more cost cutting plans at the Canadian plant, this http://investdb.theglobeandmail.com/invest/investSQL/gx.price_history?pi_symbol=SFK.DB-T&pi_old_symbol=SFK.DB-T Can someone explain the volume on the debentures, on Jan 27 more than 1 million changed hands, not sure how that much volume is possible.

Most of the intrinsic value lies with management, the fair value of the assets at Fairfax may be about 1.3 book, but then you have to account for the incremental return on invested capital that we get from Hamblin Watsa. An extra 5% on 22 billion is 1.1 billion dollars, considering that over time this is growing I'd assign a 12x multiple or 13.2 billion in value. So yea, all in all I think we're getting a pretty good deal for management and the current price/value is highly favorable!

Interesting game FFHwatcher, 2 days and less than 1 million dollars worth of shares change hands and you're ready to say the analyst was right... I was simply saying the guy/gal doesn't have a clue what the company is worth or how much money they're making. He didn't increase their target from .50 cents a share to a dollar till the stock was trading at around 1.40. Don't let a Bipolar Mr. Market tell you what something is worth, its like the tail wagging the dog... do your own research.

Thanks!

How did you estimate the value of the energy deal with Quebec Power? Two more full years until revenue starts to kick in, at best. 9.5MW @ 11.2 cents/kWh. How does that convert or is it convertible? What I first did was cheat a little and looked at the numbers provided by canfor for their 48 mw project and adjusted for 9.5 mw. Another way is to just do it straight up, I assumed 20 hours of generation per day x 1000(kwh)*9.5*.112*360(operating days)= 7.2 mil. I pulled hours of generation and operating days from thin air, I'm guessing on how many operational days they'll have. Then to get todays value, you take the pv of a perpetual annuity (7/.1) then divided by (1.1^2) to discount it to today at 10% and you have a net present value of roughly 58 million dollars.

Why is Cna still public?

I'm comfortable with cash at 19 million going forward with market prices up more than 100$ on average from last quarter I think we'll like what we see 2010 as well! During Q3 08, Ebitda was at 16 million, the cost savings from all phases of cost cutting will start to really show up in the results during Q1. Selling energy should give them about 6-7 mil per year starting 2013.

Most of us know Berkshire rather well and what it can do, I'd slap a 30 billion dollar valuation on Geico alone, but as a whole the company doesn't increase its value by 30,000$ per share each year to be as attractive as Fairfax is at these valuations. Markel would have to be at a pretty large discount to Fairfax for me to pick up some shares.

"Meanwhile, hydrocarbon imports would amount to 30 percent of GDP, instead of 15 percent" The number don't quite add up, assuming the U.S net imports of oil remain constant at 12 million a day *365*80= roughly 350 billion dollars or 2.5% of gdp as of today. For oil to make up 15% of gdp prices would need to go up above 450$ a barrel w/ no drop in demand, for 30% we'd need to see 900$. Thats one hell of a shock... Also has trade ever come close to being 25% of GDP in the U.S?

That is how it works, once a stock runs up analysts upgrade. After the stock crashes they downgrade. Probably wouldn't be that bad of a job if you didn't have to look yourself in the mirror once in a while.