A Potential Paper Trail of Profits To Asia

23-Nov-2010

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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By Liu-Yue (Louie) Lam, Co-Founder & CEO, Oxstone Capital Management,

SSCC, Smurfit – Stone Container Corp – USA, $21.65, 11/16/2010

Smurfit is one of the industry’s leading containerboard and corrugated packaging producers. It offers corrugated containers that are used to transport various products around the world, generating revenue of $5.57 billion in 2009. Smurfit-Stone Container was founded in 1926. It emerged from bankruptcy this past summer. After restructuring its legacy debts and stream lining operations, Smurfit is a much stronger and more efficient business.

Smurfit is trading at a mid cap level (2.1B); providing a potential take-over target for its larger competitors like WY and IP. It has an attractive valuation at a forward P/E of 9.8x, P/S of .36, and just trading at 89% of its Book Value. Its legacy tax credits from loss carry forward will provide a competitive advantage against its competitors who will have higher future tax burdens as well as higher debt loads. I always like to invest along with the owners/managers and in this situation the insiders own 19% of the company.

The longer term trend is also positive. The weak dollar should provide a growing future catalyst to re-invigorate the American manufacturing operations. Expect future declines in the dollar with further quant easing II and potentially quant easing III & IV due to long term structural issues. The debasement of the dollar may fuel increases in direct foreign investments as international companies begin to in-source their manufacturing operations in order to take advantage of their stronger currencies and buy into the large U.S.A. domestic market.

In addition, the growing emerging market middle class society and rising consumption patterns will provide support for continue exports from the U.S. Growing trade with Asia will likely lead to high demand for containers and paper boxes. Smurfit should directly benefit from the US and global economic recovery story.

The irony is that the USA may likely switch global roles with Asia, as U.S. may turn into an export based economy, and Asia transitions into a domestic consumption based economy.

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