Seeking Alpha
Value, deep value, special situations, contrarian
Profile| Send Message|
( followers)  

I originally was turned onto Fortress Paper (OTC:FTPLF) by Zero Hedge, and decided it warranted further investigation.

Fortress Paper is a ($265 M US) Canadian Company which operates in three different segments, Dissolving Pulp, Specialty Papers, and Security Paper Products.

The Security Paper Products, according to company documents "produces banknote, passport, visa and other brand protection and security papers" and accounts for roughly 20% of revenue.

The idea behind this trade is if there is a euro break up, many new currencies and bank notes will need to be printed.

This trade has one major complication. Fortress is trying to sell the division. At the end of FY 2011, the company split out the results of the security segment for the first time. They have also sold the power generation facilities near the security paper plant.

This leads to De La Rue (OTCPK:DELRF), a British company. De La Rue's company documents state it is "the world's largest integrated commercial security printer and papermaker. ...The Group is involved in the design and production of over 150 national currencies and a wide range of security documents including passports, driving licences, authentication labels and tax stamps. In addition, the Group manufactures sophisticated, high speed cash sorting equipment."

There is speculation De La Rue has won a secret contract to print the new Greek drachma. If it has, the stock could conceivably pop twice. Once if Greece, or anyone else leaves the euro, and again if they actually are printing the drachma. Investing in De La Rue is effectively end of the world insurance.

On the flip side, if De La Rue is not printing the money or the eurozone remains intact you should expect a pull back. With the Spanish bailout there seems to be renewed confidence Greece will stay in the Eurozone.

Regardless, keep an eye on this stock as the Greek election on June 17 approaches, there will be opportunities to both go long or short, depending on your view.

Other plays include JDS Uniphase (NASDAQ:JDSU) and OpSec (OTC:OSGFF), which make security holograms that go in money. Unfortunately these both have there problems. JDSU receives most of its revenue from communication equipment. You could theoretically hedge your exposure to that portion of the business by shorting a pure play communication equipment company, but I have not found a communication equipment company I would be comfortable doing that with. OpSec is currently in the process of being bought out, M&A news is going to dominate price action. If it does not get bought out, it might be worth reevaluating. Most other companies involved in bank note printing and security holograms are private. If you know other publicly traded companies, feel free to post them in the comments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: These Companies Actually Print Money