By Alpesh Patel, Total Wealth Research, 2024-05-30
With all eyes on semiconductors and AI… it's easy to overlook what seems mundane.
But sometimes the most boring industries can deliver the most exciting returns.
So I was intrigued when this global leader in paper and packaging showed up on my AI-enhanced scoring system.
I know… It's not the sexiest sector out there.
But the numbers on this company look good. It's a $15 billion company that's globally diversified… pays a dividend… and scores a 7 on my proprietary GVI rating system. (A system my hedge fund clients pay thousands to access!)
Plus… the stock's momentum is finally rising.
Here we go… International Paper (IP). I think it's one I mentioned a few years ago and, like many stocks, you get into it… you make your money…. you leave. They drop… you come back into them.
So where are we with this one?
It's a global leader in paper and packaging.
I know. It's not semiconductors. Everything can't be semiconductors and AI all the time.
We're here to make money. In fact, we don't care what the companies do as long as the numbers look good.
And the numbers on this one look good.
It operates in 24 countries, so we've got global diversification, and that gives a degree of resilience to a company as well.
It is all into the renewability of resources, recycling, you know, all those things that millennials and Gen Z love.
The market cap is $15 billion. It's a massive, massive company. And it pays dividends.
So let's look at some of those numbers, shall we?
Starting with my Value-Growth-Income rating… That's my proprietary algorithm, remember, which examines the growth of a company, revenue growth, sales growth and dividend yields, and weighs those factors to come to an overall score. I can examine a lot of companies in a short space of time and then throw out all the ones which don't make minimum criteria. This does because it's 7. Basically, 7, 8, 9, or 10, and that's enough.
The forecast P/E is not cheap.
You're paying almost $23 for every forecasted or expected dollar of profit. That's not cheap.
And you'll know if you're one of my GVI Investor followers that the CROCI – cash return on capital invested – of 3.5% is below what I'd really like to see.
Remember, it's the Goldman Sachs wealth management measure…
But because it's a Stock of the Week, I'm willing to loosen some of those requirements compared to what I would allow in GVI Investor.
So CROCI, 3.5%.
Volatility is relatively low. It's not too bad.
I'm not happy with the Sortino and Alpha, but as I said, it's the Stock of the Week, and therefore, I'm going to focus a bit more on the momentum than anything else.
So where are we on this one?
You can see some massive momentum recently in the chart. The monthly MACD gradient is finally rising at long last.
The company's somewhat expensive, at almost historically high expensive level. So I'm looking at this more as a momentum play than anything else.
Whilst I know some of the financials are solid and some show it overvalued, it's that momentum play aspect I like.
And on a discount cash flow basis, it's almost 25% undervalued.
The stock is a mixture of pros and cons, but overall, it's this momentum aspect with enough valuation fundamentals to make it attractive enough for me to call it my Stock of the Week.
Thank you very much.
The post Dealmaker's Diary: Unwrapping a Dividend Payer With Lots of Momentum appeared first on Total Wealth Research.
