What are you buying today?

[Gregmal]

Add to INDT and starter in RFP on the dip to 21.20. Not really sure why. 5% margin still works. 

[gfp]

now look what you went and did to RFP

[Gregmal]

16 minutes ago, gfp said:

now look what you went and did to RFP

Haha yea. I dunno. But it’s gonna close sooner than later and 70c-$1 for up to $5 upside in totally market neutral fashion seems like solid use of borrowed monies lol

[Luca]

Added to Micron

[Saluki]

Added a little more STNG again today.  I've been nibbling when it dips below $50. They've been buying back a lot of stock in the past month and if their average charter stays at what it was in Q4 (no guarantees) they will hit $20 EPS because of the operating leverage according to the conf call.  It could go the other way, but with all the disruptions to supply going on in the world I'm willing to roll the dice. 

[Spekulatius]

Bought just a little of $DFS pre-market because I really liked the results, despite the headline of their customers showing weakness.

 

Many positives like strong earnings, resumption of buybacks strong capital ratios etc.

[sfbm21]

On 1/17/2023 at 4:06 PM, Gregmal said:

Haha yea. I dunno. But it’s gonna close sooner than later and 70c-$1 for up to $5 upside in totally market neutral fashion seems like solid use of borrowed monies lol

How much is the CVR worth here ?

[sleepydragon]

Bought NTDOY last week.

Bought GE today 

[Dinar]

Sold Feb 17 2023 MANU 23 strike puts for $1.25 each.  

[StubbleJumper]

19 hours ago, sfbm21 said:

How much is the CVR worth here ?

 

Nobody knows.  Maybe $0, maybe as much as US$6/sh.

 

The CVR is basically a claim on the potential refund of ~US$500m of duties that RFP has deposited with the US government, divided by about 76m shares.  The theory goes that the US and Canada will eventually successfully negotiate a softwood lumber deal and some or all of the duties will be refunded.  But, there is no guarantee that there will be a negotiated agreement and there is no guarantee that a duty refund will be part of an agreement.

 

In the end, if 100% of the duties are refunded, the RFP CVR could be quite a profitable investment if a guy could buy it for 25 cents or 50 cents.  But, the uncertainty of whether those CVR will be worth anything at all, or when the CVR will actually be disbursed means that I don't really want to pay much for them.

 

As an example, suppose you believe that there is a 50% probability that the US government will ultimately refund 50% of that US$500m, but you suspect that they'll screw around for so long that it won't happen for three more years.  In that case, you wouldn't want to pay more than ~$1 for the CVR ie, (50% likelihood x 50% refund x US$6)/ (1 + discount rate)^3

 

If they get really cheap at some point in the next few weeks, I'll probably buy some shares.  But, I really don't want to pay very much as the likelihood, magnitude and timeframe of the payment are uncertain.

 

 

SJ

[gfp]

Good summary StubbleJumper.  Also it is important to point out that in addition to the potentially very long wait, these CVRs will not be trade-able like some other CVRs have been in the past.  So you are a 'stuck-holder' with whatever capital you allocate to this CVR.

[SharperDingaan]

This is no different to a near bankrupt company selling its tax-loss carryforward via a reverse takeover; simply substitute lumber duty for tax loss. Best case immediate use; a tax-loss goes for no more than 12-15% of its nominal value, and discounts at 25%+. Add to that, an additional 40% liquidity discount if you try to exit in volume.

 

The CVP is really a LEAP with a payoff profile very similar to a long dated zero coupon bond; big difference being that it's an equity, and there is no maturity date. Excellent trading sardine on the ongoing gyration of US/CDN lumber duties, and excellent for a TFSA wherein all trading gains will be tax free. But you're swing trading at 5-10% of value, and selling at 60-70%; maybe 2-3x every 3-4 years. Lots of volatility, lots of drama/story, but not for everyone.

  

Quite a bit different to what the SA article would like you to believe.

 

SD

 

[gfp]

But this CVR won't trade.  There is nothing to trade.  

[StubbleJumper]

20 minutes ago, gfp said:

But this CVR won't trade.  There is nothing to trade.  

 

Yep.  If you buy Resolute to get the CVR, you are stuck with it for some unknown period and cannot sell it or transfer it.  Maybe you are stuck with it for 6 months, maybe a year, maybe 5 years.  Nobody can say.  Maybe it ends up being a zero.

 

This is of particular importance if people elect to use @SharperDingaan's approach of holding the CVR in a Tax Free Savings Account or some other tax-advantaged account.  Those CVRs will use up tax-advantaged "space" for some unknown period of time, so you need to apply a healthy discount rate to your estimate of the ultimate cashflow.  So, maybe a 10% annual discount rate if you are going to use TFSA space, possibly for years on end?

 

 

SJ

[SharperDingaan]

Think more along the lines of RFP shareholders dumping their CVRs immediately upon receipt, for whatever they can get, while they can get it; the CVR gets bought into the TFSA at close to zero. 9 months later the 'story' changes, and it is slowly bled out of the TFSA at 3-4x what was paid for it. TFSA capital rises, it doesn't fall.

 

The underlying assumption is receipt of a single terminal payment at some unknown future date. Most would expect that it would actually just be Domtar paying back redirected duties (from use of the prepayment) - and only after Domtar has exhausted its own tax shields. 25% for the 'if/when' risk is conservative!

 

Not for everyone.

 

SD

[gfp]

7 minutes ago, SharperDingaan said:

Think more along the lines of RFP shareholders dumping their CVRs immediately upon receipt, for whatever they can get, while they can get it; the CVR gets bought into the TFSA at close to zero. 9 months later the 'story' changes, and it is slowly bled out of the TFSA at 3-4x what was paid for it. TFSA capital rises, it doesn't fall.

 

The underlying assumption is receipt of a single terminal payment at some unknown future date. Most would expect that it would actually just be Domtar paying back redirected duties (from use of the prepayment) - and only after Domtar has exhausted its own tax shields. 25% for the 'if/when' risk is conservative!

 

Not for everyone.

 

SD

 

I really think you are missing the point of these being non transferrable non trade-able with no market.

[StubbleJumper]

54 minutes ago, gfp said:

 

I really think you are missing the point of these being non transferrable non trade-able with no market.

 

Yes, that seems to be the blockage.  People do not seem to understand that a shareholder will be "stuck" with the CVRs, possibly for years.  For clarity, this is from RFP's 8-K filing:

 

Quote

Contingent Value Rights

 

Each Contingent Value Right is a direct obligation of Parent and entitles the holder thereof to receive its pro rata portion of all amounts received by the Company or any of its subsidiaries (or, after the Effective Time, Parent or any of its subsidiaries) or by any permitted assignee of the right to receive such amounts (each an “Applicable Recipient”) at any time after the date of the Merger Agreement, in respect of cash deposits made by the Company or its subsidiaries with the U.S. Treasury in respect of estimated countervailing and antidumping duties on entries of Canadian-origin softwood lumber products exported to the United States (the “Deposits on Estimated Duties”) made by the Company or any of its subsidiaries on or prior to June 30, 2022, including interest paid by an applicable governmental authority in respect thereof (the “Applicable Refund Payments”), as reduced (without duplication) by (i) the amount of reasonable and documented, out-of-pocket expenses (including the fees and disbursements of the CVR Agent (as defined below) and the CVR Representative (as defined below), but excluding, for the avoidance of doubt, taxes) incurred after the Effective Time and as of the time of any applicable distribution of Net Applicable Refund Payments, by Parent or its subsidiaries in the administration of the Contingent Value Rights and not previously applied to reduce Net Applicable Refund Payments and (ii) certain incremental cash taxes arising from the receipt of such Applicable Refund Payments (the “Net Applicable Refund Payments”).

 

The Contingent Value Rights will not represent any equity or ownership interest in the Surviving Corporation, Parent or any affiliate thereof (or any other person) and will not be represented by any certificates or other instruments. The Contingent Value Rights will not have any voting or dividend rights, and no interest will accrue on any amounts payable on the Contingent Value Rights to any holder thereof.

 

The Contingent Value Rights may not be sold, assigned, transferred, pledged or encumbered in any manner, other than transfers by will or intestacy, by inter vivos or testamentary trust where the Contingent Value Right is to be passed to the beneficiaries upon the death of the trustee, pursuant to a court order, by operation of law, or in connection with the dissolution, liquidation or termination of a corporation or other entity which is the holder thereof.

 

[rkbabang]

Picked up a few more SI 2025 $12.5 calls and a few more 2025 OSTK $25 calls.

 

[bizaro86]

Also, it isn't obvious to me these will be qualified investments for a TFSA/RRSP. 

 

I've paid penalty tax on holding CVRs in my RRSP in the past. If they put it in your account as a security and it doesn't trade on an exchange, it isn't an allowable investment. If that happens, I recommend not ignoring the situation (which is what I did) and transferring the CVR to a non-reg account at some deemed value (which is what I did eventually).

[SharperDingaan]

Agreed, as the CVR currently stands, the value is essentially zero. While technically the CVR could be transferred into a trust, and rights to that trust sold - it is very unlikely. Similarly without a standing bid to make a market, it isn't going to qualify for a regulated account.

 

SD

[maplevalue]

Two adds to existing positions recently:

 

Morguard NA Residential REIT - one of cheapest REITs out there who are buying back shares for first time since 2016

Scottish Mortgage Trust - a small 'we are past peak inflation' position

[Jaygo]

are you talking about MRG.un

[maplevalue]

Yes

[Dave86ch]

Yesterday added to BTC and added and staked to ETH

[dealraker]

Posting on JOE this morning I couldn't help but think that may now we've gotten to the point of indexing the US ain't gunna cut it any longer, that getting returns is going to be quite the challenge.   To me things like payments and media have attracted such interest for so long, how much more?

 

Bitcoin's going to be a Tesla on self-drive whose technology has been corrupted, the ride will be wildass superb entertainment.  

 

Old dealraker, that's me, posted here that he'd bought GE and Boeing a while back; then there is Berkshire, JOE and such things.  I think we are in a world of slow grind, that the returns will get difficult.  Maybe GOOG and META notch up just on valuation?  And banks, yea for whatever it is worth I thiink whatever the yield curve is we just got too down on banks.  But the upside?  Not much.

 

But anyway, COBF is going to be a good place to get an idea or two.  My personal portfolio probably doesn't have a snowball's chance in living hell of doing any better than low single digits for some time.   I do own a bit of Fairfax...for a long time.

 

Bought Baxter a few times lately.