Canfor Corp. (CFPZF)

One of my favorite ways to find new stock ideas is to steal them from a couple of my favorite mutual fund managers. Aegis Value Fund is one of my two favorite mutual funds. (Fidelity Low Priced stock fund being the other.) So this next purchase of mine directly came from a recent purchase by that fund. And they give a good explanation of why they picked the stock in their advisors report...

"Another company we have found attractive to purchase in the past six months is Canfor Corporation. We have invested $4.5 million in this leading Canadian forest products company. The Canadian softwood lumber industry has been buffeted by a strong Canadian dollar, declining homebuilding activity in the U.S., and a larger than usual supply of lower-quality wood resulting from a mountain pine beetle infestation. We believe the company has sufficient balance sheet strength and management capability to see its way through the current storm. The balance sheet strength will be bolstered substantially by the Softwood Lumber Agreement that is set to be finalized this quarter. Once effective, we estimate the company will receive close to C$500 million after-tax in tariff refunds. The balance sheet as of June 30, 2006 did not reflect the vast majority of this C$3.50 per share cash infusion. To put the size of this refund in perspective, the stock has recently been trading at about C$11.50 per share. The
Softwood Lumber Agreement is likely to improve margins at Canfor in the mediumterm. However substantial margin improvement will only be achieved when lumber prices stabilize and the market more fully adjusts to recent events and higher Canadian exchange rates.
While the near-term conditions in the lumber market are challenging, Canfor’s mills are relatively well-positioned and efficient. Its costs are lower than many of its Canadian competitors in Quebec, who have been first to shut capacity. Canfor is also diversified into U.S.-based production, providing some hedge against adverse Canadian conditions. We expect it may apply its strong balance sheet and tariff refunds partly to increase its proportion of U.S.-based production. The housing market downturn may provide some good buying opportunities in the U.S. While the next few quarters are likely to prove challenging, we believe the company maintains the ability to generate strong cash flows in coming years."

The company is right now trading at C$10.50. I bougth 1100 shares @ $8.95 (us dollars). Also, I bought 15,000 more shares of Partygaming $.59. That brings my total exposure to Partygaming to 38,000 shares at around $.62.

A good site to track the progress of the number of players at PartyPoker is PokerScout. It seems the number of players at PartyPoker is increasing nicely. The 7 day average of the number of cash players was around 3800 a couple weeks back. Now it's around 4400. Pretty good.

Partygaming (Revisited)

Today Partygaming reported that overall revenue for the last four weeks has been nearly $1 million per day. This is comparable to overall international revenue during the last quarter. Although international revenue went down a little bit after U.S. players were banned from gambling online, it has stabilized and is improving. I still own 23,000 shares at around .63/.64c/share. I continue to believe this stock is significantly undervalued. Revenue and margins should increase from here and Partygaming continues to bring out new games such as Bingo, Backgammon. It should easily be able to cross market these other games to their already growing poker base. This stock easily worth $1.00/share (.50p) and I would not be surprised if a company like MGM makes a bid for this company.

Vestin Realty Mortgage II, Inc. (VRTB)

I recently purchased (3,000 shares@$6.92) a great small cap stock called Vestin Realty Mortgage II, Inc (VRTB). This stock primarily invests in short terms loans secured by real estate. The company currently trades at 75% of tangible book value. It has hardly any liabilities and the assets are the short term loans. Its loans are geographically well diversified (California is the highest at 25%) among 10 states. The loans are primarily backed by commercial properties (49%) and land (28%). Because of this, the income and 11%+ monthly dividend that it pays out seems safe. The price on this could go up 25% in my estimation. If not, sit back and collect the monthly dividend. This stock is doing a 1 for 1.3 split in the middle of this month (December). So, expect the price to fall accordingly.

In reply to Aravind's ( http://aravindsuri.blogspot.com) question about my opinion of Microsoft (MSFT) and Walmart(WMT), I think they are both fairly valued. If WMT, went below $40 (highly unlikely), I would be a writer of bull call spreads. Usually, I write bull call spreads when the stock is somewhat undervalued and I know the upside is limited. In the example of Home Depot, I felt the fair valuation of the stock is $45. This is why I bought a $35 jan 2009 call and sold a $45 jan 2009 call for a net price of $3.50. Right now, it's worth near $5 for a gain of 40%+.

Wellpoint Inc (WLP)

Response to Fangstar’s question of deciding between buying Wellpoint Inc(WLP) or UnitedHealth Group (UNH)

Wellpoint Inc (WLP) and UnitedHealth Group (UNH) both seem to be undervalued equally. Their earnings growth over the past year seems to be nearly identical, and they are trading at a similar P/E ratio. Analysts are also predicting similar earnings growth rate in the future.

The only difference I see is that UNH has the options scandal in the background. Personally, I don’t think it is that big of a deal, but you never know how the market might react when the actual charge is revealed. So, that is a negative for UNH. The positive I see is that UNH has had a higher earnings growth rate over the past 5 years than WLP. But, both of these stocks are undervalued.