Ara? Nbg?

[JV_Picker]

I own the stocks in a retirement account. My usual holding period for certain financial instruments is 18 months, so it'll be a few months before I do something about my positions. I want to know your perspectives on some of my holdings.

Aracruz Cellulose: I bought it in August, 2007 around $60. The price is now hovering just above $31. According to Zacks.com, the company has a 31% world market share in supplying pulp for various paper products. Over the past year-and-a-few, the company had a land dispute with the indigenous people in the rural portions of Brazil, eventually costing the company about 10% of its acreage. Despite what happened, the stock was a good performer.

Unfortunately the company's cash reserve, which was $584 million last June (Businesswire), suffered a yet-to-be-revealed loss. Much of the cash lost appears to have been tied up in currency futures contracts (!!), betting that the Brazilian real would continue to appreciate against the U.S. greenback. The CFO resigned not long after the announcement of the loss, which was a few days ago.

The saving grace for the company is the pulp market, which is having trouble keeping up with demand. I'm wary of this company's immediate future because the company may have to use its credit lines to continue operations.
The appreciation of the real (until now) may have also made the company less of a low-cost supplier than it was in the past.

National Bank of Greece is a demonstration of contrasts. The ADRs have been sliding down in price as if it were a losing American financial institution, but the bank is more like BAC than anyone else. They've been buying other businesses over the past two years; the deposits, revenues and profits keep growing every year; and they're expanding into eastern Europe and Africa. It has side businesses that add to its profitability (a conglomerate of sorts). The only major hiccups I saw over the past year was a Greek general strike over pensions that briefly threatened the business' HQ, and an authorization to release more stock for future purchases as needed (the company reported recently that it bought back 2+ million shares this year).

Last August, 2007, I bought it at $13. The shares are now valued at just under $8. I am sorely tempted to buy more shares of the company.

What do you think about the companies?

[JV_Picker]

Yeah, I'll tell you what I think:

ARA is in a squeeze! They have contracts that bet against the U.S. dollar, and they lost BIG TIME. Now, they have to get out of these contracts without jeopardizing their cash reserve of $600 million, but the problem is that the reserve is in "local currency instruments," which means to me that the reserve MIGHT BE in depreciating (against the US$) reals. BUT! Most of the revenue is "linked" to the US$, while its debt is "exposed" to "local currency."

The company postponed its conference call until Monday. Since you can't participate in that, I suggest that you e-mail them.

The company predicts slower demand, period, which will make getting out of the derivative contracts tough. Their backstops: Since the real is depreciating again, their undisputed "lowest-cost pulp champion" crown will theoretically remain with the company. The company implies that its long-term contracts are solid. Half of ARA's eucalyptus pulp production is directed to the production of tissue paper, and who's gonna start buying less bathroom and facial tissue because of a recession??

Continue to monitor the way the company handles its derivative losses, since you're in for the long haul. If Aracruz can't hack it, dump the stock.

NBG. Its per-stock value was crushed today to under $5. The bank touts that it has no subprime exposure, and about 30% of its revenue comes from non-bank operations. The bank is awash in a flood of revenue and profits because of deposit and loan growth, and the businesses that it has either bought or sold. The bank depends solely on its deposits (90%) for its loans, and the Greek government has established a domestic fund to bolster local bank assets, not to bail out anybody.

Yet, the stock is being treated like the sequel to Wachovia. Now, Standard & Poors believes that the global slowdown will eventually affect the bank, which may be true. The stock itself appears to be oversold (this is based on my opinion of the business vs. how fast the stock's value has dropped over the past month), and I believe that you can hold on to it.

[JV_Picker]

...of course, nobody told me of the influential strikes that the national bank worker's union have been able to stage in Greece against NBG over two (!!) workers fired LAST YEAR. Didn't find this on any news source aside from Google's news collector. Stock's in the $3.20s. I'm still holding on to the stock.