I want to talk about 3 stocks that I believe can make investors some nice pocket change in FY 2007. A way to free up cash for 07 investments is to take advantage of recent Dow gains and cash in some earnings. It’s never a good idea to ride the wave too long because you might wipe out. Once you free up some extra cash, start looking for new financial investments opportunities.
My first pick is International Paper (IP). The last 2 picks are posted here.
International Paper is a global paper and packaging company that provides everyday products like printing paper, food packaging, and shipping packaging for the world to enjoy. They’re #1 is their industry, and I always love a best of breed company. Most importantly, the company recently divested a number of their businesses to solely focus on paper and packaging products. Their divested businesses include:
- Forest Real Estate
- Coated Paper
- Chemical Plants
On top of that, IP’s board of directors agreed on a $1.5 billion share repurchase program to return value to shareholders. With only 493 million shares outstanding, each share carries a sizeable force and becomes more valuable as more shares are repurchased by IP. The exterior looks very attractive, but investors must review the fundamentals and see what’s lurking there.
- Forward P/E: 16 – this makes IP cheap for 07
- PEG ratio: 3.97 – IP isn’t a growth stock, it’s a pure value play and a good one.
- Enterprise Value/EBITDA: 9 – low entire value of the company divided by earnings before taxes ratio.
- Revenue from divested businesses equaling between $8-$10 billion.
IP is committed to cleaning up their balance sheet, returning value to shareholders, and further pursuing the paper and packaging industry. Go over to International Paper’s site and do some homework on the stock. I’ve been tracking it for 2 months, hoping to find a good entry position. I wouldn’t enter right now, but recommend keeping IP on the radar. If it dips below $30, then I’m pulling the trigger.
[...] Since bonds and interest rates carry an inverse relationship, a bearish stock market will force billions of dollars to flow back into the bond market, thus causing interest rates to tumble. The slowing of American economic growth also contributes to lower interest rates because the demand for capital decreases. The laws of supply and demand put pressure on high interest rates, and eventually the rates begin heading south. This will all occur in the next 3 years if not in 2007. [...]
[...] My 2nd pick for 2007 is Crocs. My third pick will feature tomorrow morning. Read Part 1 of the series. [...]