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Strategies & Market Trends : Value Investing

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petal

To: petal who wrote (65627)	12/8/2020 8:53:26 AM
From: FIFO_kid2	2 Recommendations Read Replies (1) of 78821

To make money in commodities you have to be contrarian know the businesses well and be patient or you will lose money. If you want a good mentor in the commodity space I would recommend listening to Rick Rule of Sprott. For one I wouldn't be so concerned about picking a commodity going up as opposed to finding the right company. If you look at my post on the low price cash ratio site here post 1812 I mentioned Corridor Resources which is an oil and gas company that is up 200% since that post. How many oil and gas companies are up since October of 2018? Commodity stock investing is about lowering your risk, tedious research of the company at hand, granted some luck, patience and finding catalysts. As for your paper stock candidates I would certainly take time to research your target. The long term business of most of the paper industry is a melting ice cube to set an example the long term demand for newsprint has been approximately -6% per annum for the last decade but I do certainly agree with you that the paper sector is very oversold and a well researched company likely would provide a great mean reversion candidate. So I can certainly see the appeal. One reason I loaded up on RFP (the lumber stock I am referring to that I own shares in) is the firm has been quietly diversifying away from newsprint and specialty papers (businesses in a major secular decline) into lumber which I see as more of a cyclical business Not to add the current management is very shareholder friendly (they sold some paper producing assets at a premium to BV that were vulnerable to the future) and shrewd in buying lumber assets during a down cycle and now we have this pricing catalyst which was apparent many months ago. My average cost is around 15% of tangible BV which I think is certainly on sale. A somewhat similar situation I am currently long LEE (which is a newspaper publishing company) for some mean reversion potential because the firm is going to show great financial comps in Q4 due to higher revenues and cost synergies from the purchase of Warren Buffet's newspapers and trades around an 80% free cash flow yield and the company really has been the last surviving competent survivor in the space. I think it will make a special situation trading candidate given the operating leverage until the sales comps again begin to decline.

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