We have so many amazing stories out there right now, so many stocks that seemed prime to run because the ingredients are just so right to do so.
I know it. I see companies in my job that I can't believe exist for this moment -- they are so right. And many of them sound boring, or even seemingly run of the mill, when they are anything but.
Take KapStone (KS), a linerboard and paper company. Most people would instinctively pass on something like this company because who needs paper when you can own Regeneron (REGN) or Isis (ISIS) or Agios (AGIO).
But I am from a different era. I am from an era where, when things get hot in the country, you can own a company like KapStone and just make fortunes in it. You just need to know which to bet on. You to need to know the bloodlines. And with KapStone, all you need to know is Roger Stone founded and runs the company, Roger Stone of the old Stone Container, the greatest corrugated box maker of the era.
Stone cobbled together Kapstone from a bunch of different companies, including Longview Fibre, and has pretty much recreated the old Stone Container, a company that thrives and trounces the numbers when the economy strengthens.
That's because containerboard is a price setter. It goes up with price increases in rapid fire until more contained board plants come on line or pricing collapses.
Right now we are at an inflection point for container board. It is about to ramp and ramp huge.
KapStone has the capacity to meet the demand and be price disciplined because it has huge cash flow at current prices. More importantly, plants that used to cost hundreds of millions of dollars to build now costs billions of dollars. Plants that communities used to clamor for, now can't even get permitted. In other words, a company like KapStone could have multiple years of price increases without a half-dozen plants being built to wreck margins. There's real price discipline now.
In 1987 the stock market crashed, with the Dow shedding more than 500 points in a day from a dramatically lower base, a 22% decline.
At the time you didn't' know whether the economy was strong and the stock market weak or if the stock market forecasting economic weakness. In reality, the market was wrong and as soon as I realized it, I reached for Stone Container. This stock just took off when the economy reignited and we got price increase after price increase and we caught an easy double.
I think if the economy keeps getting hotter, history will repeat itself, except this time in the form of KapStone, the heir to Roger Stone's old Stone Container.