Cliffs: I’m impressed by the new CEO

In the past, I have repeatedly criticized Cliffs as the company has done a lot of things that it should not have done.  The new CEO (Gary Halverson) is here and he is cleaning house.

• The Ring of Fire chromite mine is cancelled and halted “indefinitely” (Nov 2013).  This is smart because the project isn’t close to being economic.
• Phase II of the Bloom Lake expansion has been put on hold “indefinitely” (Feb 11 2014).  This is smart because the expansion project is risky and very marginal.
• Halverson is willing to talk to activist shareholders.
• Halverson strikes me as open and honest with shareholders.

If I was any good at predicting commodity prices, I would seriously investigate a long position in Cliffs.  Unfortunately I am terrible at predicting commodity prices.

*Disclosure:  No position in CLF.

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NRCIB: Closed my position for silly reasons

1. The fundamentals of NRCIB have not changed much since my original writeup.
2. The price has gone up by roughly a third.  I have decided to take my profits and to reinvest them elsewhere.
3. It bugs me a lot that the borrow on NRCIB is around 4% and is much higher than NRCIA.  (This bugs me mainly because I cannot lend my shares out.)  It would make more sense if the cost of borrow was the other way around as I believe that the price ratio between NRCIB and NRCIA should be roughly 6:1.  The current ratio is around 2.7:1  ($39.29/$14.73).  The arbitrage trade is to short NRCIA and to go long NRCIB.

*Disclosure: No position in NRCIB or NRCIA.  I never shorted NRCIA because I dislike arbitrage trades that involve risk.

Dollarama: It’s a wonderful business but…

(This is not an actionable idea.)

Dollarama’s stock has performed phenomenally well since its IPO.  The underlying business has grown its profits as fast as Salesforce has grown its revenues.  Their returns on invested capital are phenomenal (see my post on dollar stores).

Yet I cannot get past the company’s self-dealing with members of the Rossy family and how the financial statements don’t add up.

Pretium’s Resource Estimate filed Feb 3 2014

This is yet another post on Pretium.  It’s not a particularly important one unless you are interested in following the on-going Pretium saga.

Closed my CHK put option position

Here’s what I think about Chesapeake…

Shipwrecks versus bull ships

It struck me that it is better to short a company that burns through cash than it is to short a company that plows cash into blatant stock promotion.  When a company wastes a million dollars a year on travel expenses, that money is never coming back.  But when a company spends money on blatant stock promotion, some of that money might actually come back and increase a company’s intrinsic value.

Closed my Tile Shop position

When I originally shorted Tile Shop, I was hoping that some massive Crazy Eddie-type accounting fraud would be uncovered.  (Let me be clear: I really have no idea if accounting fraud is happening.)