04-11-2014, 09:56 AM
I bought IP last year because it looked good on paper (no pun intended), and because MCD is starting to transition away from styrafoam cups and into paper, which I hope is a secular trend.
Then I decided to do more due diligence and read the morningstar and S&P reports, and the investor presentation (which doesn't mention anything about MCD's cups), and I couldn't figure out where the high EPS growth estimate comes from. The top line growth is very slim and the difference between the top and bottom line estimate is too wide for me to believe that it will come from margin expansion. The bull case says that cardboard boxes are going to be the new brick & mortar as everyone has everything shipped, but I consider that speculation. There's also the secular headwind of digitization. Eventually I decided I don't have enough conviction, and I sold it for a small profit.
Then I decided to do more due diligence and read the morningstar and S&P reports, and the investor presentation (which doesn't mention anything about MCD's cups), and I couldn't figure out where the high EPS growth estimate comes from. The top line growth is very slim and the difference between the top and bottom line estimate is too wide for me to believe that it will come from margin expansion. The bull case says that cardboard boxes are going to be the new brick & mortar as everyone has everything shipped, but I consider that speculation. There's also the secular headwind of digitization. Eventually I decided I don't have enough conviction, and I sold it for a small profit.