Author Topic: FGE.to - Fortress Paper (formerly FTP.to)  (Read 697416 times)

biaggio

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Re: FTP - Fortress Paper
« Reply #10 on: May 12, 2011, 08:05:15 AM »
Got some FTP today. Hard to resist after a 42% drop from their peak. I think they'll do very well over the years..

Liberty,

I would like to like this company. Impressed with CEO. I have read some about this a few months ago (but I have forgot some of the details---)

Concerned that operation is very cyclical (paper industry).

Do you have a couple sentence summary of your investment thesis that you could share with us?

I always like things that are on sale, but I try not to anchor on what it sold for in the past. Any rough idea of what a fair value is for this security?


Liberty

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Re: FTP - Fortress Paper
« Reply #11 on: May 12, 2011, 08:47:40 AM »
Hey Biaggio,

I definitely recommend that you do NOT put a lot of weight to what I'm saying, because compared to most people here, I'm a beginner, and I'm still more qualitative than quantitative in a lot of ways.. But with that said, here's what I see with FTP:

-A manager owner of high integrity and talent at capital allocation. What some here call a jockey stock -- it's the only thing I invest in, because I don't think I'm good enough to identify the best ways to allocate capital and make macro calls, so I've been focusing on becoming good enough at identifying good jockeys. I have 8 stocks in my portfolio, and all of them are what I consider high-quality manager-owners.

-I like the strategy. They operate in an industry that has seen better days, allowing them to pick up quality assets at deep value prices and convert them to make high-margin niche products. High-security bank notes selling for something like $45k a tonne shouldn't be compared with making toilet paper... Much higher barrier to entry for competition. The dissolving pulp plant seems to be very well timed to take advantage of the rise of China and India - countries where rayon is better adapted than cotton because it breathes better and it's cheaper - and even at half the current rayon prices, they would still make a profit because they got the asset so cheap and they're going to be a low-cost producer.

-Pretty conservative with debt, reducing the chances of a blowup if the economy goes really bad.

-Like Altius (another of my picks), the value strategy means that if the economy goes down, they might be able to pick up more assets that will provide good value in the next up cycle. I like companies that win when things go well, and win when things go badly with the economy.

-I try not to pay too much for growth, but in this case, it's hard to totally ignore. Chad seems to be constantly looking for new deals - dollars to buy for nickels or dimes - and I wouldn't be surprised if there was 1 or 2 more deals like the Thurso plant over the next year or two. And looking at what they did with Thurso, I trust that they know what they're doing and are only going to pull the trigger if there's a margin of safety. I also think there's a good chance they'll be able to leverage things like the $750k security technology that they purchased from the bank of canada into good value (even if only by widening of the moat of their security banknote business).

-They seem to be dedicated to keeping costs low and squeezing efficiencies from existing assets. No big management team, no expensive offices. And while they're increasing capacity at the banknote plant, they're reducing the number of employees and management on the payroll.

-I don't have all the numbers on hand, but when I looked at the potential earning power of the Thurso plant once the conversion is over, even with the conservative scenario, this made FTP look pretty cheap, with a PE way under 10. Of course, there are risks there: execution, cost overruns, labor disputes, market for dissolving pulp tanks by more than 50%, etc.

So there it is. Not a very fancy analysis, but good enough for me right now. I'd rather be approximately right than exactly wrong :) and I like quality stocks that I should be able to hold for the long term rather than cigar butts that I'd need to time an exit strategy for..
« Last Edit: May 12, 2011, 06:14:05 PM by Liberty »
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biaggio

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Re: FTP - Fortress Paper
« Reply #12 on: May 12, 2011, 09:08:03 AM »
Thanks Liberty!

I agree with your philosophy + am myself trying to slowly convert to high quality owner managers. This learned from this board and has served me well so far.

I am going to delve deeper into FTP.

Thanks again

Liberty

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Re: FTP - Fortress Paper
« Reply #13 on: May 12, 2011, 12:56:40 PM »
Old video from Fortress' youtube account:

http://youtu.be/ZFzWBl4caFc
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VAL9000

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Re: FTP - Fortress Paper
« Reply #14 on: May 12, 2011, 02:04:27 PM »
Hey guys,

What are your thoughts on the paper money supply and replacement rates?  I find that I'm carrying less and less cash.  Even McDonald's takes Visa or Debit..  The cashless society is almost as storied as the paperless office, but I'm seeing signs.  Worried?


Liberty

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Re: FTP - Fortress Paper
« Reply #15 on: May 12, 2011, 02:31:47 PM »
Hey guys,

What are your thoughts on the paper money supply and replacement rates?  I find that I'm carrying less and less cash.  Even McDonald's takes Visa or Debit..  The cashless society is almost as storied as the paperless office, but I'm seeing signs.  Worried?

They ask that question to Chad almost every time, and his answer is that they haven't found a country where cash levels are going down.

This seems counter-intuitive to me too, as I almost never carry cash, but I think in Europe they carry a lot more cash and even in other places, economies are growing and while cash isn't growing as fast as electronic currency (Chad has said that cash grows 3-4%/year), it is still growing.
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biaggio

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Re: FTP - Fortress Paper
« Reply #16 on: May 12, 2011, 02:37:33 PM »
"What are your thoughts on the paper money supply and replacement rates?  I find that I'm carrying less and less cash.  Even McDonald's takes Visa or Debit..  The cashless society is almost as storied as the paperless office, but I'm seeing signs.  Worried?"

here is maybe a dumb question: what happens when governement adds liquidity or decides to purchase 10 year U.S. bonds? Do they pay with cash? Is it just a digital entry? What do they actually use to purchase them? In other words is there paper document or currency of some sort backing the electronic currency

A little off topic but I was also wondering if anyone believed that U.S. gov't could or would purchase stocks/ETFS or other financial securities in an attempt to support or manipulate/stabilize the financial market???

Liberty

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Re: FTP - Fortress Paper
« Reply #17 on: May 12, 2011, 05:08:46 PM »
Another thing I forgot to add is that paper currency wears out and must constantly be replaced (that's why you rarely see a really old bill still in circulation). They probably also periodically retire old bills that are still in good condition but have fewer security features and replace them with new ones.
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biaggio

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Re: FTP - Fortress Paper
« Reply #18 on: May 12, 2011, 05:37:21 PM »
Val

http://www.youtube.com/watch?v=cOuUF2tf7Hw&NR=1

CEO discusses a printing printing money.

He says the demand is growing 3-4% (kind of counterintuitive?).

VAL9000

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Re: FTP - Fortress Paper
« Reply #19 on: May 12, 2011, 07:35:35 PM »
Thanks Liberty and biaggio for the insightful responses to my questions.  I guess it might make sense that as the population and inflation grow, so too should the currency supply..  maybe, maybe the existence of bigger bills cuts into this?  Just wondering out loud.