Some market-beating investors have recently taken positions in the downtrodden shares of Abitibi Consolidated (ABY-OLD), the globally dominant newsprint producer struggling with declines in newspaper readership and industry overcapacity. The luminaries include Marty Whitman of Third Avenue Management (17% annual return since 1992) and the Contra The Heard guys (who report a 26% annual return since 1996).
Whitman sees a Peter Lynch play, i.e. a company in a lousy industry that can pick up market share as others exit. Its debt is high but getting paid down -- from $5 billion to $3.7 billion (C$) over the past two years. Book value is nearly double the share price.
The dividend was suspended a little while ago. This would be a good signal according to a recent study by Thomson Financial: it found that S&P 500 companies cutting their dividends experienced an average 27% gain in stock prices two years afterward.