Phoenix01

The second just appeared and is named: Bill

FFH borrows $150M @ 7.5% and ORH buys back $150M in their own shares. Globally they have as much cash available and FFH benefits from 80% of the buyback through their current ownership position. Since ORH is expected to return 15%, FFH will get a better return than the interest cost. This also acts a hedge. If ORH shares drop (major disaster, market collapse or continuing soft market) then they will get ORH at an even better price. In my opinion, FFH is just loading the gun. All though $150M is a relatively small amount, it will still buy back 3 million shares at the prices that ORH has paid so far in 2009.

I met DengYu at the FFH dinner 2 years ago and was really impressed by him. I think that we can all learn quite a bit from him. Balancing risk and reward is extremely difficult and it is rare to find someone who can do it with such ease. I have also purchased several options last month and I am sitting on an 80% gain. Today I started to lighten up, but I think that there is still plenty of up side remaining in these options because the market tends to overshoot. Even if I can get more later, I must first take the risk of holding on to the options before I can benefit from the potential reward. Knowing when to back out is just as important as knowing when to get in.

As part of my "sell in May & stay away" strategy, I sold my Gannett shares and LEAPs with a very hansome profit.

For what it's worth, I am selling just about everything and taking the summer off. The market sell off took up too much of my time and I will use this opportunity to revisit my investing approach. Sell in May and stay away!

I took the opportunity of the rally to bail out of my ORH shares and replaced them with an equal amount of ORH.A and ORH.B. I think the summer will not be kind to stocks, especially those that are vulnerable to hurricanes. I am happy with the 10%+ yield for my parked money and I think that I also get some sort of protection against treasury fluctuations.

It would seem to me that there is no rush to get into this position just yet. The head winds are still really strong. I am guessing that during the summer Mr. Market is going to give us a better opportunity.

SSW got hammered today when they lowered their dividend. The conference call for Q1 is below. http://seekingalpha.com/article/133679-seaspan-corporation-q1-2009-earnings-call-transcript?source=yahoo This may turn out to be a huge opportunity to load up on calls and wait for the dividend to be re-instated. However, I could not find any 2011 leaps and I do not think that 2010 leaps will necessarily be profitable.

Does anyone remember what website Sam suggested we investigate if we wanted to understand the economics of coal, oil and gas? Sam mentioned that the presentation explained this very well.

I do not think that the oil companies in China have the same clout as in America. The electric car will not face as many challenges. The main technology of an electric car is essentailly the batteries. The car body is a know technology. The electric engine is straight forward. If BYD is a world leader in batteries, then it makes sense that they will be the world leaders in electric cars.

April 30, 09. Last year it was on May 1, 08.

That is the real question. Will all of these wonderful companies get pulled down by the market tide, or is the tide heading back? What strategy can be used to hedge the potential drop while maintaining a postion that will rise to reflect the excellence of the companies in question?

It looks like the institutional buyers are increasing their > 110% stake in Gannett. http://ca.us.biz.yahoo.com/ap/090409/gannett_mover.html?.v=1 Based on today's price movement it looks like the shorts are starting to cover their positions. Let's hope the panic continues!

Hi James, Thank you for the invitation, however there is a little problem. I found this on the website for the hotel "Barrister's Restaurant will be closed for refurbishment Friday April 10th and reopening for dinner on Monday April 27th, 2009. We apologize for any inconvenience." Cheers, Eric

NEM (Canada) bought back 1% of outstanding in Jan & Feb 09.

In a declining industry they have managed their business in such a way that they have been able to pay out dividends and buy back stock. Why? They must have some sort of advantage. The debt does not particularly scare me because they have the cashflow to support it. In a down market the weak get killed and the strong take advantage. Gannett already has a track record of being a survivor. Will history tends to repeat itself?

I got turned on to this by seeing the huge loss FFH had taken on their initial position. They appear to be a well run company caught in a difficult environment. They appear to be doing what is needed to steer themselves out of trouble. The market has slaughtered the price and it appears to be way over done. For fun I looked at the ownership (nasdaq) and found that institutionals own 110% of the stock with another 30% of the stock sold short. This appears to be an easy multi-bagger within the next few years. Can someone please torpedo this idea?

The article is interesting from the point of view that FFH is starting to be sought out by the media. All it took was for FFH to: 1) become one of the highest earning companies in Canada, 2) get upgraded to investment grade Buying a big block of shares probably did not hurt.

I just sold my small position because the common is getting too diluted. Still managed to make reasonable profit > 50% in a couple of months.

Thanks to Al, Eric & oec2000, your insight is very useful. I have had several of my puts assigned. Usually when the market is tanking. Lesson #1: keep the cash on hand! The margin will probably disappear at the same time that you need to buy the shares. The market usually bounces back fairly quickly, so once the initial cash drain occurs, there is usually an opportunity to offload a portion of the position at a profit. This however does not seem to last very long. Lesson #2: don't get too greedy. Take the easy return and leave the balance to others. Eric, I find your strategy with options intriguing. It appears that the puts are a way of getting a yield on your cash. The re-investment of the yield on cheap calls is simply an investment (in this case of the yield). This works if the puts are not assigned. I am guessing that your puts are significantly out of the money. I was looking at a much simpler view of buying using puts. If assigned/exercised, then the desired discount was achieved and the shares are purchased at a discount. If not, the cash is yours to keep. In this environment, there are so many opportunities that collecting the premium creates new opportunities in the future.

I have been looking at selling puts as a way to generate some $$ while waiting for the prices to drop. If the price does not drop, the premium is cash in the pocket a t a time when cash is king. If the price drops, the net price paid is lower than if the stock had been purchased initially. Any thoughts on this strategy?

I think that they reached the 70% ownership mark and therefore are able to consolidate. In this market, it may be better to hold $$ than to buy back shares. It looks like there will be plenty of opportunities to put the cash to work.

NCX also caught my attantion, but I turned down the idea because they burn cash. They seem to need the "Alberta Advantage" to help them complete.

If you add the mass retirement of the baby boomers to all of the current woe, there is still a significant downside potential on the overall markets. However, if you are investing in solid companies at excellent prices, the overall market does not matter. FFH has given us a great example.

I was lucky enough to catch the bottom and get a 3 bagger out of this recent announcement. Too bad it was on a very small amount.