Wadhwaney: Resource Stocks on the Radar

Mike Breen: Is there anything else you're seeing out there in the market that we haven't spoken about?

Amit Wadhwaney: One area that's really quite interesting and is sort of unfolding for us--I observed in a couple of my letters in the past--that an area that is gradually beginning to get quite interesting, actually almost quite exciting, is the area of resources. Now, primary resources had a wild, wild run. We owned nothing in the area of energy for a while. We were very big on energy in the early 2000s, pretty much out of it, we returned to it in the form of EnCana. Subsequently, in the most recent quarter, we purchased a company, a U.S.-listed company called Leucadia, which has holdings in the form of iron ore, it has holdings in the area of copper mining…

Breen: Spain, some places like that.

Wadhwaney: Another company that we actually bought was a U.S.-listed company, which we always thought was very expensive, finally crumbled during the first calendar quarter this year, is a company called Weyerhaeuser. It's a great household name. The core of the attraction to us is their enormous Pacific Northwest timber base. It is absolutely outstanding. This is a disappearing, diminishing, scarce asset, which I think is currently grossly undervalued by the market.

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Breen: So, they have an underlying asset that you think is worth a lot of money. And then, almost a call option on an economic rebound if that boosts demand?

Wadhwaney: There's multiple call options sitting inside of Weyerhaeuser. The timber assets are this long-term appreciating asset. Even if they do nothing to it, it will build in value. Because, as you see problems in Canada, in the interior British Columbia, where there is gradual decimation of the forest by the Loblolly Pine Beetle, for example. You are seeing gradual, progressive tightening in the timber values there. Not withstanding what the housing market does, the beetle is doing its job. So, the timber base will appreciate.

Separately, Weyerhaeuser has a homebuilding business. Weyerhaeuser also has a sawmilling and lumber business. Which will, at some point in time, start to do much, much better than recent history. The housing market will probably not be as bad indefinitely.

Breen: OK. Well, fantastic, I thank you for your time and best of luck.

Wadhwaney: Thank you very much.