LABL

[madcowdisease]

Here is a somewhat obscure stock I've followed for a decent amount of time now. They are in the packaging and label printing business and one of their largest customers is Procter & Gamble which is headquartered in the same city. That's a nice best of breed company to be affiliated with.

A large raw cost for this company (and anyone in this business) is natural gas. We see natural gas prices at a six month low as of yesterday and this stock is trading at roughly the same level it was when natural gas was twice what it costs now.

Furthermore, we can assume this company will pick up more business with P&G's acquisition of Gillette. And they just reported a solid quarter a couple of weeks ago so business looks strong.

Not without caveat though, the volume on this thing is low. There aren't many analysts that cover it either. All that means is there is room for this thing to move upward once Wall St. discovers it and more analysts begin to follow it also.

Happy trading.

[madcowdisease]

Had a nice move this morning. Natural gas is sliding, thus so are input costs. Could this be the breakout?

[madcowdisease]

Natural gas, this company's, and all others in the industry, largest input cost is now below $7. When making projections for Q2 the estimated natural gas costs were far higher than what is transpiring and should continue now that we are approaching the end of the heating season.

All this equates to one of long investors favorite phenomena, a positive earnings surprise. Oh, and did I mention the takeover possibilities of this company?

[madcowdisease]

Been moving lately. Some estimate fair value at $35. That would be a nice 25% gain.

[BuyOnDips]

It looks like a winner. I love the 5 year chart! I now have another stock to add to my watch list. Thanks MCD.

[madcowdisease]

It looks like a winner. I love the 5 year chart! I now have another stock to add to my watch list. Thanks MCD.

No problemo. The only thing I can find "wrong" with it is the low float. This is attributed to the fact so many insiders hold stock. Not necessarily a bad thing IMO.

[madcowdisease]

That float and low volume seem to be advantageous. A couple hundred shares and this thing is up 2+% today.

Also, there was an earnings surprise by one of this companies competitors earlier this month. Seems logical it is due to lower than anticipated input costs. Let's hope this "surprise" holds true for the sector.

[loslobos71]

Thanks madcowdisease for your reply, btw. I really like this company after a day or so of research; hopefully Ill have time to do more this weekend. I looked at their SEC filings and I couldnt find this, so I figure Ill just ask you if you know: what % of their rev. comes from P&G? I dont like to own companies when over 40-50% of their rev comes from one customer (ie PLAY and SGTL, you know what happened when aaple stopped using SGTL's chips....). Which other companies do they provide labels for? Thanks once more.

[loslobos71]

I just found it on the SEC's website, sorry for double posting. So its 30% to PG and 16% to that brewer... I dont think thats too much. And WOW, $10.5 Billion in sales for Gillette. Do you think that the market has priced LABL doing Gillette's packaging?

[madcowdisease]

I just found it on the SEC's website, sorry for double posting. So its 30% to PG and 16% to that brewer... I dont think thats too much. And WOW, $10.5 Billion in sales for Gillette. Do you think that the market has priced LABL doing Gillette's packaging?

You know man, I never even bothered to figure that out; I just knew it was a lot. I figured P&G was such a steady and B.O.B. company that it didn't matter. The more business with Procter the better IMO. BTW, I should disclose I've held a DRIP with Procter for 9 years or so. It's pretty obvious I believe in A. G. Lafley, huh?

But thanks for the info.

To answer your question about the Gillette deal being factored in I would have to say the charts are conficting but i'm leaning toward "no". If you pull up a 6 month chart of PG and a 6 month chart of LABL you will see they made similar moves in January. This was when P&G announced better than expected integration costs with Gillete. No real reason for LABL to jump. But when the PG deal went through in October P&G got a big boost and LABL flatlined. One could assume that if you were able to recall the exact date Procter announced the takeover, July 2004 rings a bell, you could then check LABL's chart to see if it moved correspondingly. You'd have to eliminate all other potential variables too, which may prove difficult.

I say no, it isn't factored in since this stock has such light volume. And that may be another thing to look at, the volume. If you notice spikes right around when the deal was announced and when it went through you might have evidence to support the theory it's priced in. But going back to what I said in the message I sent you. It stands to reason the business wll be governed by contracts which may or may not have expired. Unless you're on the inside I doubt anyone knows exactly when that will be, supporting it isn't priced in yet. One is tempted to consider that new razor Gillette has now too. If LABL gets that, forget about it ;). It's obvious that G and PG are innovative and coming out with new products and the synergy that should result between the two in foreign markets especially only forecasts good news for LABL.

Let me know what you think.

[madcowdisease]

This thing has been doing well for me so far. Not to be a pig I'm going to skim a third or so of my position and see what happens.

[madcowdisease]

OK, I'm booking gains. I don't know why there is all of the sudden a ton of interest but I've had a nice run and don't want to overstay my welcome.

[madcowdisease]

Early on, and I attribute it to the learning process, I've given up unrealized gains by not selling when I should, sometimes half. Consequently I am getting out though my gut tells me this thing is about to run especially with double the average volume the past couple days. I'll keep an eye on it but at the moment I'm happy to have discovered and ridden a winner. But without prescience or clairvoyance I find it just as hard to pick a top as it is to pick a bottom.

Comments and insight welcome.

[madcowdisease]

If any of you watched Cramer's show last night he highlighted a stock he liked as a secular growth story, Sonoco [SON].

"The last ignored stock is Sonoco, a packaging company that is "making a killing," Cramer said. The food companies "are beating each other up" by competing over packaged foods, and Sonoco is the arms merchant here, he said.

The company reported a "great quarter and has a lot of potential," Cramer said.

A similar co., that is even more esoteric than SON is LABL. This co. has an extremely small float so any publicity or popularity could send it skyward. I haven't looked over it's financials since I sold in March but it fits the bill of the type of stock Cramer highlighted last night in SON. Jim always talks about pin-action, LABL could be pin-action off of a Cramer pump.