When a sector experiences a turnaround, it doesn’t always bring all its stocks along for the ride right away. Cramer likes to look for the “catch-up stocks” – the good plays that lag their competitors during a turn. He thinks he found one in the corrugated packaging company Temple-Inland.
Sure, corrugated packaging – think cardboard boxes and particleboard – isn’t the sexiest industry, but let Cramer explain why he thinks you should take note.
International demand for cardboard products is increasing and, given the weak dollar, domestically produced cardboard is getting awfully cheap, which basically takes foreign competition out of the picture. That gives the Texas-based TIN an advantage, as does the way the company actually makes its products. By using less recycled cardboard, TIN is less exposed to higher costs of recycled materials and therefore more efficient. Better yet, most cardboard and corrugated products can only be made from softwood trees, and the U.S. is one of the few places left in the world with uncut softwood forests. The general expectation, Cramer said, is that companies like TIN will use those trees to meet the increased demand.
TIN itself has been a dog even as its main competitor, Louisiana-Pacific , has burgeoned. But that’s why TIN is the perfect catch-up play, Cramer said – it’s the better company, even if the stock doesn’t reflect it.
Until a few months ago, TIN had real estate and financial services components that were suffocating its main cardboard business. But Carl Icahn, who owns almost 10% of the company, convinced management to spin off those tarnished parts of the business that were so exposed to the poisonous housing market. The stock is down 30% since the spin-off but Cramer sees a light at the end of the tunnel as pricing is expected to firm up and profitability is expected to increase. The stock was even upgraded by Citigroup on Monday.
The turnaround is underway, Cramer said, it’s just taking some time to reach TIN. But when it does, he’d want to be on board.
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