Bank of America Corp (BAC) Among Contrarian Capital’s Best Contrarian Investments

The best of the rest

At number four is Resolute Forest Products Inc (NYSE:RFP). With demand for newsprint and specialty paper down due to a shift in advertising and print media to the internet,Resolute is being rescued by the surge in lumber prices as the boom in new construction causes the price of building material to nearly double.  Even the drop in demand for newsprint really hasn’t been much of a spoiler for Resolute Forest Products Inc (NYSE:RFP), as the company has had increased demand from Latin America and Asia, both of which account for 47% of total shipments, up 11% from Q1 2012.  After refinancing much of its debt at more favorable terms, the debt burden of the company has been all but eliminated as its debt/equity ratio improves to 0.2 compared to an industry average of 0.8. All this makes for a very compelling reason for Bauer to increase his position in Resolute Forest Products Inc (NYSE:RFP) by 195% since adding the stock to his equity portfolio during the second quarter of 2012.

Last but not least is NRG Energy Inc (NYSE:NRG).  NRG generates and provides energy and energy services in major markets across the company.  This in itself should worry investors in that a company whose main source of revenue is ultimately tied to the price of natural gas or other energy resources faces challenges as those prices decline. But for NRG Energy Inc (NYSE:NRG), much of that risk has been mitigated by its diversification into renewable energy. And along with that comes the expansion into the electric car market in which NRG Energy Inc (NYSE:NRG) is providing charging stations.  Its eVgo Network of charging stations charges commercial and residential services a fee to install these stations.  As a result, net income jumped 183%for the Q4 of 2012.

Final thoughts

There are some very compelling securities in the Contrarian Capital fund and names that will certainly merit another look in the future.  While not all the companies in the top five would be considered “distressed,” they have certain challenges that appear to have been addressed either through diversification or by partnerships and have very promising futures as a result of these changes.

Disclosure: none