In conclusion, we believe pharmaceutical stocks as a group are selling at attractive valuations, in comparison to the free cash flow and earnings they generate.
In hindsight, our initial assessment of Sears Holdings being worth more than $50 per share a few years ago was most likely too optimistic. This is taking into consideration that we received in excess of $23 per share in distributions from various spin-offs and right offerings, which we later sold in the market.
In 2017, we initiated a stock lending program where the Fund received interest on the shares lent. For Sears Holdings, the total security lending interest we received for the year was about $7.25 million or about $6.41 per share, all in U.S. dollars. This shows how heavily shorted the common shares of Sears Holdings have been. For the six-month period ending on June 30, 2018, the total security lending interest received was $483,596 or about $0.43 per share, all in U.S. dollars. In spite of the interest income earned from security lending, plus the approximately $23 per share received in distributions from various spin-offs and rights offerings, it has not been a good investment.
Resolute Forest Products
As of June 30, 2018, the market price of Resolute Forest Products (RFP) was at $10.35 per share, giving a market capitalization of roughly US$935 million dollars. As we have explained in the past, the company continues to have consolidated sales of close to US$3.5 billion and in each of its major business segments, it is a global leader. It continues to be the biggest volume producer of wood products east of the Rockies, the third largest in North America for market pulp, the number one producer of newsprint in the world and the largest producer in North America of uncoated mechanical paper and an emerging tissue producer. The wood products segment continues to have revenues of approximately US$800 million, while the other three segments each continue to have revenues of approximately US$900 million. We believe that each of the four business segments could fetch at least US$400 million in a normal market and, as a result, RFP may be undervalued.
With the new CEO coming in, there is more optimism on what the company can do with its four business segments. This is reflected in the stock price as it has moved up from $4.60 in March 2017 to $10.35 as of June 30, 2018.”