| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
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| BUSINESSWEEK INVESTOR -- INSIDE WALL STREET
Crumpled Papermaker Convinced that cyclical stocks are on their way back, some investors have been flocking to one such group--papermakers. But some cyclicals are more beaten down than others. In forest products, Louisiana-Pacific (LPX), a producer of lumber, wooden panels, and other building materials, tops the losers: It fell from 24 1/2 in July to 11 5/8 on Nov. 29. Lately it has rebounded to more than 12, thus ''reinforcing the probability that LPX may be done going down,'' says Mike Hurley of E*Offering, the investment bank of E*Trade Group. He thinks there has been net accumulation of LPX shares at their lows. ''Shares of LPX are exceptionally cheap,'' argues Peter Ruschmeier at Donaldson, Lufkin & Jenrette, noting that the stock sells at just 1.1 times its book value, with a 4.4% dividend yield. For value investors, LPX ''deserves a closer look,'' he adds. One possible stimulus for a rise: Wood prices usually hit a low at this time of year. But in fact, prices of plywood, lumber, and compressed particleboard have been rising in the past six weeks, notes Richard Schneider, an analyst at PaineWebber. ''There are reports of solid demand,'' with some orders going into December, he adds. DLJ's Ruschmeier says the stock has been hamstrung by management's moves to add capacity and make acquisitions amid slowing demand. If the company delays capacity expansion and ''aggressively buys back stock instead, the shares can easily double,'' he says. If LPX doesn't do these things, ''there is little catalyst to trigger a sustainable rally--short of being acquired by a competitor,'' says Ruschmeier. A New York money manager says a major paper company ''may make a preemptive bid, at around 23 a share.'' On fundamentals alone, the stock is worth 18, says this investor. By GENE G. MARCIAL _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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