A recent drop in the dollar has seen foreign producers opening U.S. factories at "near record pace." Barron's magazine says a somewhat unexpected result is a serious shortage in boxes and containers.
Shares of packaging stocks have not fared well in recent months due to burgeoning raw-material costs and more-expensive transportation. Now it seems the industry has already or will soon turn the corner -- prices are beginning to rise. Box companies also produce 36% of their sales overseas, making them a source of diversification in the event of an extended domestic slowdown.
KeyBlanc analyst Christopher Manual likes the following three companies:
- Silgan (SLGN): 60% of its portfolio is in recession-resistant metal food cans.
- Grief (GEF): makes industrial packaging products. Its China market share hasn't yet hit double digits, leaving plenty of room for further growth.
- Pactiv (PTV): its plastics line-up makes it susceptible to high oil prices. But Pactiv recently locked in a round of price hikes. Shares trade at 12.7x 2008 earnings, compared with 13.4x for the sector.