timwest
Long

Packaging Corp - PKG - oversold and cheap

NYSE:PKG   PACKAGING CORP AMER
634 8 25
I'm working on this long term analysis of the cardboard box company PKG             . Sheer panic in the stock is setting up a low risk entry for long term investors. It's trading at 10 times or 10% earnings yield (roughly). By the end of February it "could" lose it's downside momentum on the monthly chart. January had a large decline and February so far has a much smaller range, so the momentum is weakening to the downside.

Keep in mind that PKG             did "triple" in price from 2012-2015 in a very steady manner. So now it is shaking out those investors who fell asleep at the wheel paying 2 times sales for a boring cardboard box maker at the peak of its move.

Now that it has fallen almost in half, it is trading at 75 cents on the dollar of sales and is nicely cash flow positive and in a boring, yet stable to growing business. 2 times sales is so ridiculously expensive - but 75% of sales is so ridiculously cheap.

I placed a technical target back up at the consolidation price around $62 per share. I put the stop down around $38. The last sale is $46.39 last at 11:10AM EST.

Clearly this is a longer term trade setup.

Tim
Comment: Monster winning trade so far. It is nearly up to the target, up more than 20% in a short time. Raise the stop to a 10% profit if stopped out.
Trade closed: target reached: Solid, long term profit from this trade setup.
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Good eye. Sub 6 EV/EBITDA as well.
+1 Reply
whats the horizon? fundamentally, the company has been doing really well. I would love to make this trade, thanks for the reco.
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timwest PRO airricpoh
Many months. If I get 25% return (already 10%) in three months, then I might re-consider. I'm using a monthly chart, so if you could hold for a year that would be a good idea.
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46 to 38 is the exit plan? That is a wide range. Do you allow so much when investing for long term? Also, do you hold any position?
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I am tracking this idea, not investing in it. And yes, some stocks need wide stops. This is a monthly chart, so the risk is based on the monthly trading range.
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Well for just an idea it panned out really nice - up to now the price technically was moving up
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Cha-ching.
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That date, 12thfeb - i recall well, as i entered a lot of positions that i exited early. PKG was one of the stocks i made a profit of on a short swing due to your chart bringing my attention to it. Amazing how it it slowly gained the whole year.
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