Bill Gunderson

Best Stocks Now!™ come in all shapes and sizes, as well as all types of packages. And Packaging Corp. of America (PKG) is no exception.

This packaging midcap stock is one that I’ve featured many times before. In fact, I first brought people’s attention to PKG in February of this year and when I tweeted:

And look at the charts of both of those stocks today…

So don’t buy the stock that makes the computer (Dell, Apple, Hewlett-Packard), buy the stocks that make the boxes that the computers come in!

Crazy?

Yes.

But true?

Absolutely!

Now compare that chart that shows PKG hitting new, all-time highs with Hewlett Packard’s (HPQ) chart.

Was I right? Absolutely.

Performance

PKG has been one of the best performing stocks in the market! In fact, it gets a performance grade of A-!

Over the last five years PKG has delivered nearly 27% returns to investors while the market has delivered only 7%. Over the last three years, they’ve delivered 40% while the market has delivered 15%. And over the last 12 months PKG has been up a whopping 95% while the market is only up 18%!

HP during the same time is up 23%, which is fair, but it’s not 87%! And if you look back over the last three and five years, the box stock has ran circles around the computer that was inside the box!

Valuation

There has to be much more value to the computer than the stinking box it came in, right?! Well, I’m an investor—I’m much more interested in the stock, not the usability of the product itself! So next let’s look at the valuation of PKG to find out!

Valuation is a crucial piece to my equation in determining the value of a stock. I’m talking about valuation models that carry out earnings, growth, and target prices over the next five years.

PKG is currently trading at about 17 times forward earnings with a 12.3% growth rate expected over the next five years. It has a PEG ratio of 1.40.

When I take today’s earnings and extrapolate them out at about 12% over the next five years, I come up with a target price of $96 per share five years down the road.


Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now. http://www.pwstreet.com