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Resolute Forest Products Inc (RFP): Steelhead Partners Continues Trimming its Stake

In line with its trend of past few months, Michael Johnston’s Steelhead Partners has again marginally trimmed its exposure to Resolute Forest Products Inc (NYSE:RFP) recently. The fund sold over 227,000 shares of the company at an average price of $16.19 per share in several tranches on October 3, 6 and 7. After these transactions, the fund now holds a total of over 12.3 million shares in Resolute Forest Products Inc (NYSE:RFP). Based on the data available to us, Steelhead Partners has been owning shares in Resolute Forest Products Inc (NYSE:RFP) for several years. It held over 13 million shares of the company in the second quarter of 2013 and after has been consistently trimming its position.

Michael Johnston - Steelhead Partners

Apart from Steelhead Partners , Prem Watsa’s Fairfax Financial Holdings and Francis Chou’s Chou Associates Management are two hedge funds bullish on Resolute Forest Products Inc (NYSE:RFP) and as of June 30, 2014, own over 29 million shares over 4 million shares in the company, respectively. Shares of Resolute Forest Products Inc (NYSE:RFP) are up 21.9% year over year, but down more than 3% year to date.

Resolute Forest Products Inc (NYSE:RFP) is in the business of pulp and paper manufacturing and has its headquarters in Montreal, Quebec, Canada. Based on second quarter 2014 results, the company has a negative EPS of $0.02, compared to a negative EPS of $0.45 per share in the same quarter last year. Sales of the company in second quarter of 2014 were $1.1 billion, down $16 million from the same quarter of last year. Pulp and Paper industry is facing tough times overall as the usage of paper has declined with the advancement of technology. Most people are now using their gadgets to read and browse information, compared to the earlier era when printed books and newspapers used to be the sources of information. The dwindling demand of pulp and paper might be one of the reasons why Steelhead Partners is decreasing its exposure to the industry by cutting its stake in Resolute Forest Products Inc (NYSE:RFP).

Steelhead partners is a value-focused hedge fund founded by Michael Johnston and Scott Schaefer (CFA) in 1996. As of June 30, 2014, the fund’s equity portfolio had a value of over $1.2 billion. The fund has a concentrated portfolio when it comes to stocks. Most of the fund’s investments are in bonds of large publicly traded companies. The fund held over 32 million shares of Globalstar, Inc. (NYSEMKT:GSAT), 20 million shares of Alpha Natural Resources, Inc. (NYSE:ANR), and over 2 million shares of Level 3 Communications, Inc. (NYSE:LVLT) by the end of second quarter of 2014. Globalstar, Inc. (NYSEMKT:GSAT) is up over 53% year on year, Alpha Natural Resources, Inc. (NYSE:ANR) is down more than 63% year on year, and Level 3 Communications, Inc. (NYSE:LVLT) is up more than 56% year over year.


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