A lump sum investment in 1990 in the common shares of Abitibi-Price
Inc. would have produced a compound annual rate of return of 13.41% if
the investment was divested on July 26, 1995. A lump sum investment in
1990 in the common shares of MacMillan Bloedel Ltd. would have produced
a compound annual rate of return of 6.12% if the investment was divested
on July 26, 1995. The closing prices on July 26, 1995 for Abitibi and MacMillan
were $CDN 24 5/8 and $CDN 19 1/2, respectively.
[Since July 27, 1995, Abitibi Price merged with Stone Consolidated and became Abitibi Consolidated.]
Abitibi-Price is a Canadian based forest products company that manufactures newsprint and uncoated groundwood papers. Abitibi-Price's vision is to become the world's finest manufacturer and marketer of groundwood papers. Abitibi-Price, like other North American forest products companies, has suffered through the last five years with substantial losses. However, the company returned to profitability in the last quarter of 1994 and the outlook is good. The stock has appreciated roughly 20% since December 1994. The current price of a share of Abitibi-Price Inc. may already reflect its earnings potential in the upside of this business cycle. Consequently, an investment in Abitibi-Price is not recommended at this time and I expect an investment in Abitibi-Price will produce a compound annual rate of return of -2 to +3% over the next eighteen months.
MacMillan Bloedel Limited is the largest forest products company in Canada. Roughly three quarters of its revenue is generated from building materials and engineered lumber. The remaining one quarter of revenue is split between paper and packaging. MacMillan Bloedel intends to produce more wood products in finished form and reap the added margin from the higher value added to the product. Prices for buliding materials surged in 1994 and have moderated somewhat in 1995. I do not see this as a long term trend. I expect a stable recovery for building materials over the next five years. The graphs clearly indicate that MacMillan Bloedel outperformed Abitibi-Price; it also outperformed many other forest products companies. I see a good future for MacMillan Bloedel and therefore expect an investment will produce a compound annual rate of return of 17 to 22% over the next eighteen months.
Click here to view Table 1.1 Comparative
Click here to view Table 1.2 Price Earnings Ratios.
Click here to view Table 1.3 Record of Common Dividends.
Click here to view Table 1.4 Financial Position and Capitalization.
here to view Figure 1.1 Balance Sheet Ratios.
Click here to view Figure 1.2 Earnings and Retained Earnings Statement Ratios.
Click here to view Figure 1.3 Combined Ratios.
Click here to view Figure 1.4 Value Ratios.
Click here to return to Three Islands Investments' home page.