KapStone Paper Has Been on a Tear Lately

The company makes container board and other paper products, but investors shouldn't ignore this "boring business" stock

Jun 11, 2014 at 2:32PM

Legendary investor Peter Lynch suggested that investors "invest in what they know" and they should look for small, boring businesses that provide consistent performance over the years. It should be easy to understand and easy to explain. In other words, look for unloved, underappreciated stocks. I believe that KapStone Paper and Products (NYSE:KS) meets these requirements.

Founded in 2005, the company went public in 2007, making it the new kid on the block. It is a maker of containerboard, corrugated products and also specialty paper products. Corrugated boxes are basically the same type of box that consumers receive from Amazon.com and other online retailers. As online retailers continue to chip away at the brick-and-mortar competition, sales will increase, and result in more boxes shipped. It is also the largest U.S. producer of kraft paper in the United States, which is a key component needed to create bags for agricultural goods, pet food, baking products, and cement.


Kapstone Paper Acquires Longview Fibre. Source: Bill Wagner, The Daily News

Growth via acquisitons
The company has made strategic acquisitions, including U.S. Corrugated in 2011 for $330 million and Longview Fibre in 2013 for $1 billion. These are both sizable acquisitions for a company that currently boasts around a $3 billion market cap. The Longview acquisition provides scale, resources and a national footprint into the containerboard space. KapStone now has a presence in many strategic regions in the U.S.

First quarter 2014 results were very strong. Revenue was $549 million, an increase of 72%, and net income rose 74%. These are pretty solid results following severe weather. The storms resulted in lower production volumes. However, there were several mentions from the management team about optimizing existing plants to lower costs and improve efficiency. The company spent $45 million in machine upgrades along with a $4 million reduction in annual personnel costs. These actions will benefit the company in the long term by lowering input costs, leading to higher margins. .

If investors are looking for a small company in the paper products industry, then KapStone is a good choice. Generally, companies in this industry pay investors a generous dividend, such as Packaging Corporation of America (NYSE:PKG) and International Paper (NYSE:IP) These larger companies currently have generous dividend yields between 2%-3%, but at the expense of slower growth. Choosing a company depends on the goals and expectations of the investor.

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Mike Fee owns shares of Packaging of America. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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