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Canwest in Bankruptsy Protection


Uccmal
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I'm no expert in bankruptcy and big media liquidation situations, but if we don't at least get back our initial inve$tment, it will have been a classical value trap situation (i.e. you tought that you fund a diamond in a dumping ground, but only your eyes were shining, not the rock itself).

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I don't think there really is such a thing as a value trap.  Almost any good value idea is a distressed idea, or a business under pressure.  The eventual outcome is a direct result of that business' economics, operations, competitive advantages and management.  If any of them falters, there is always the possibility that the business could go under. 

 

Imagine if Coca-cola continued their shrimp farming business rather than expanding their global footprint or reinforcing their distribution system.  Even Coca-cola could have gone under if management was stupid enough.  So you will be correct on investment ideas and you will be incorrect on investment ideas...the goal is to get the big ones right most of the time!  ;D  Cheers!

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I'm no expert in bankruptcy and big media liquidation situations, but if we don't at least get back our initial inve$tment, it will have been a classical value trap situation (i.e. you tought that you fund a diamond in a dumping ground, but only your eyes were shining, not the rock itself).

 

 

Canwest has been a real dog for FFH, but it's important to try to separate the causes of the bad outcome.  Some of it may have been bad analysis, and some of it may have been bad luck.  The latter element is an important consideration in this case, particularly as it relates to turbulent markets over the past year. 

 

If Canwest had been able to dump their Australian sub for double what they actually got and if the bottom hadn't fallen out of the advertising market, the financial situation of the company would be much different.  With the long term pressures that media companies are facing, I still think that it would be a dog even without last year's market collapse, but perhaps it might look more like a Gannet type of dog instead of a bankrupt company.

 

Anyway, Canwest will be a permanent loss of capital for FFH shareholders, but it's not completely the result of bad analysis.

 

SJ

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