Investors and analysts are constantly looking for new and accurate indicators to help gauge the strength of the economy. One of my favorites is the action of the packaging & container sector. As demand for packaging increases, it can be directly linked to the strength of the economy, as more companies will be shipping and packaging goods for consumers.
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In late April, the packaging & container sector tested an all-time high before pulling back with the overall U.S. stock market. Recently, the sector has begun to outperform yet again, suggesting the underlying economy is actually better than most suspect.
Ball Corp (NYSE:BLL) is a $5.3 billion company that makes steel and plastic containers used in the beverage, household and industrial sectors around the globe. The stock is up 12% year-to-date and is sitting about 4% below an all-time high. In addition to the container business, BLL also makes products used in the aerospace/defense sector.
Crown Holdings (NYSE:CCK) is a $4.6 billion company that is known for its can containers that are used in everything from beverages to cookies. Fundamentally, CCK is attractive with a forward P/E ratio of 11.5 and price-to-sales of 0.58. Technically the stock tested an 11-year high in mid-August, only to fail with the overall market. A close above the $29 area will spark a new breakout and buy signal.
Bemis Company (NYSE:BMS) is a $3.2 billion company that sells flexible packaging products and pressure sensitive products in the U.S.. The products are used by the food, medical, personal care and printing industries. BMS pays the highest dividend of the companies in the article, paying out an annual yield of 3.2%. Technically, the stock has been in a trading range all year, with support near $27 and resistance at $31. A breakout above $31 or a pullback to support at $27 are the two buy signals.
Silgan Holdings (Nasdaq:SLGN) is a $2.4 billion company that makes metal and plastic containers used in the food, animal, medical and personal care industries. After hitting a new all-time high in late April, the stock fell by nearly 20% in a matter of two weeks. Since the drop, the stock has made its way back to a four-month high, but continues to trade well below the all-time high. Due to the big drop and stock struggles, SLGN is a stock to avoid.
Graham Packaging Company (NYSE:GRM) is a new IPO that began trading on the NYSE in February. Since that time, the stock has been in a choppy range between $10 and $13.50, and is currently in the middle of the channel. The company makes custom blow molded plastic containers for consumer products. GRM is the smallest of the group, with a market cap of only $743 million. However, fundamentally it is the most attractive, with a forward P/E ratio of 6.2 and price-to-sales of 0.32. If you are up for some risk, GRM is the play in the sector.
The Bottom Line
All in all, I can make a case for all five stocks in the sector. But if it came down to picking two, it would be GRM, due to fundamentals, and CCK, based on the technicals and fundamentals. (For related reading, take a look at Blending Technical And Fundamental Analysis.)
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