Adding 2.81 percent to his stake of paper production company
Resolute Forest Products (
RFP
), investment Guru
Prem Watsa
of Toronto-based Fairfax Financial Holdings (
FRFHF
) now has a shareholding of almost 19 million shares as of the
end of this year's third quarter, according to
GuruFocus Real Time Picks
.
As Fairfax's chairman and chief executive officer, Watsa's
strategy for generating returns comes from a "disciplined" focus
on underwriting combined with the investment of its assets on a
total return basis, described on the company's profile on the
Fairfax website.
Resolute Forest Products currently trades at $12.40 per share,
with a market cap of $1.28 billion. Headquartered in Montreal,
Quebec, the company's major products include newsprint,
commercial printing papers, market pulp and wood products, as it
operates 21 pulp and paper mills and 22 wood product facilities
in the U.S., Canada and South Korea.
Despite a reported net loss of $20 million (or $0.20 per share)
in Resolute Forest's second quarter, its adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA) was up 69
percent from the first quarter of this year.
Resolute Forest's newsprint, coated papers and specialty papers
segments all experienced operating income increases for the
second quarter compared to its previous quarter, while its market
pulp and wood products segments experienced losses of at least $6
million.
The company's second quarter shortcomings were affected by
several factors: a 5-percent decline in shipments for some
segments accompanied by seasonally higher volumes, a weaker value
of Canadian currency, increases in transaction prices and drops
in inventory.
"Keeping with our optimization strategy, we will continue to
manage our exposure to export to markets where unfavorable
currency fluctuations have created difficult conditions for North
American producers," said Richard Garneau, president and chief
executive officer of Resolute Forest Products, in a second
quarter news release. "We expect a modest improvement in the
coated, specialty and newsprint segments as a result of seasonal
demand increases, but the impact of recent newsprint and
specialty paper mill restart announcements are creating
uncertainty. Based on current conditions, we do not see a
meaningful improvement in the pulp segment for the balance of the
year."
The company ended the second quarter with about $1 billion of
available liquidity, after using cash on hand to repurchase more
than 1 million shares of its common stock, a total cost of $12
million.
Resolute Forest Products has scheduled to announce its third
quarter financial results on Oct. 30.
Watsa first acquired shares of Resolute in the second quarter of
this year, starting with 18.5 million shares. Fairfax is
currently 10 percent owner of the company.
Other Gurus who purchased a stake in Resolute in the second
quarter include:
Donald Smith
of
Donald Smith
& Co., Jim Simons of Renaissance Technologies LLC, Michael
Price of MFP Investors LLC, Third Avenue Management and Pioneer
Investments.
To view an interview with Prem Watsa highlighted by GuruFocus
earlier this month, which was originally published in the winter
2011 Fairfax Financial Newsletter, visit Interview with Prem
Watsa of Fairfax Financial Holdings Limited.
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