Packaging/Paper group is on fire today after Packaging Corp. of America (NYSE:PKG) blew estimates away last night. International Paper (NYSE:IP) looks to be the best play on PKG's results (up 15-16% pre mkt): - Deutsche Bank is upgrading IP to Buy from Hold and upping their price target to $24 saying that while significant risks remain, it is clearer & clearer that the containerboard industry has managed itself in a fundamentally different fashion over the past year. Prices reported in the trade papers have dropped $70-80/ton off last autumn's cyclical peak. However, prices were reported stable in June and appear stable again in July. Moreover, most industry players remain[More...]

Traders' Increasing Tolerance for Risk Yesterday, one of my friends asked why the markets continue to climb. My first response was "more people are buying than selling". After a quick grin, I explained that there has been a shift in risk tolerance. If we look at some of the stocks that have rallied since March - Citigroup (C), Ford (F), Temple-Inland (TIN) - it's apparent that traders are bidding up the call option on these companies' long-term viability. In some cases, there is reason to think current shareholders will eventually end up alright (after ignoring opportunity cost).[More...]

Early in April after a month long run off the bottom I posted a list of equities that gained at least 60% in the preceding 4 weeks (Apr 5: The Meek Shall Inherit the Earth: 92 Stocks Over $10 Returning 60%+) The list was a whose who of beaten down merchandise. Generally, by week 4-5 of an oversold rally these type of names begin to peter out but the ramp has been relentless in lower quality, low price stocks. My gut tells me quant (and other varieties) of hedge funds have been shorting these names, using fundamental reasons - expecting some pullback after huge runs - only to be run over again and again even in week 6 and 7 of this rally. All it takes nowadays is saying "business has stabilized at the worst levels we've seen in decades" to elicit glee and massive short covering rallies. While the market was flattish last week, I[More...]

Back in the good old days of Dow 900, the Chevy Nova and Jimmy Carter’s brother urinating on an airport runway after a few too many Billy Beers, companies that bought companies for no other reason than to enlarge were blessed as conglomerates and traded in a similar fashion to techs in ...

Back in the good old days of Dow 900, the Chevy Nova and Jimmy Carter's brother urinating on an airport runway after a few too many Billy Beers, companies that bought companies for no other reason than to enlarge were blessed as conglomerates and traded in a similar fashion to techs in the mid-90s (without the 24/7 media hype and talking heads goading potential investors, of course). Investors soured on them when the realization set in that many of these acquisitions were bought for no sane reason and then poorly managed into fiscal oblivion. Conglomerates may well be returning to favor. This time, a few are focused using the Buffet model and others are straight-up value plays that may prove to be winners when the economy rebounds - maybe even a bit earlier. Sure, there are companies of this genre that are stinkers, but a few may offer compelling returns over time. Here are some that are presently trading below a PE of 10, based upon[More...]