Fortress hit 52 week low

Long story short, everything that could go bad went bad. Company is now burning throught cash, taking debt, talking about buying more and more mills and the market price for DP is dropping like a rock in a no-bottom pool.

Chad may have great ideas but he had a major execution problem on this one. He was too aggressive in currency printer conversion and mill conversion/purchase.

If he manages to get out of this pool, I may get back in. Until then, I’m out of Fortress losing an average of 70% of my initial capital.

Too bad I got in excited by Chad’s pink view of the future. Lessons-learned #2. Buy on actual not estimates.

Disclosure : none.

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Posted in FTP
2 comments on “Fortress hit 52 week low
  1. Doug says:

    Well to play the devils advocate, Chad doesn’t control the price of DP and he doesn’t control the value of the Swiss franc or a central bank’s ordering timeline. The debt is in line with estimates, apart from a little extra from the cash burn at Landqart and the longer then anticipated timeline at Thurso.

    As for the execution problem at Thurso, with a conversion of this size, these set-backs are normal. Dissappointing, but normal. One would have a very hard time finding a company that ever executed a project of this size without a few nasty set-backs.

    I would be dissappointed if he didn’t at least look at new acquisitions, but with the way things are, I doubt you will see him bring any on. He did mention in a conference call that if he could pull off an acquisition without issuing and equity or debt, he would be all for it. This was a joke, but what he was saying is that for the time being, they will work on what they have going, since acquisitions are effectively on hold, until things change.

    He did need to outline his targets, to get investor support and the higher those targets were, the higher the share price should be in reflection to them. The higher the share price, the more equity he could issue to support the debt that had to be used. He has over-promised and underperformed, but I doubt many other CEOs would have done things much differently.

    The $64,000 question for this company, in my opinion, is where are DP prices going to settle out. Unfortuneately no one knows this and that uncertainty is driving the current share price to its current level. Will Fortress have the cash to deal with a temporary lower DP price? I think it will, but of course, without knowing how long it will last, one cannot be sure. I do know that when one is sure, you will not get to buy the stock at these levels.

    • Dominic Nadeau says:

      I do think your analysis is true. The only thing is I think the risk is now very high to see FTP default in the medium term instead of outperform. You may make tons of cash by buying at these levels. I’m not into DP projection but I do not think we will reach the contract price of 1200$ anytime soon so I prefer to preserve what is left of my capital and wait for an entry point at an higher level if I see the sky cleared out.

      Until then I’ll spend my money on better investments on the current parameters.

      Thanks for your input.

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