Sometimes the profound truths are the easiest to
This is particularly true when it comes to investing. Many
investors make the process much more difficult than it needs to
be. At its core, investing is a simple process governed by a few
Choosing investments based on what you already know is one of
these simple yet profound truths. I first heard this rule
articulated by Peter Lynch, the superstar manager of Fidelity's
Magellan Fund. Lynch wrote one of the best books on the stock
market, "One Up On Wall Street," in which he stresses this simple
Leading commodity trader Jim Rogers also repeats this mantra
whenever he is asked what to invest in. I learned this several
years ago when I interviewed Rogers while he was running on a
treadmill -- an interviewing first for me -- in his home gym.
When I asked if he cared to share any investing tips, he replied,
"Look around you -- what do you see?"
I saw racks of dumbbells and a pitcher of orange juice, among
many other things. I must have had a perplexed look on my face
because he said, "Invest in items you use every day, because if
you use them, it is very likely everyone else does."
I was hoping for specific tips to pass along, so I was
disappointed he wasn't willing to share any insider-type
information -- but after further consideration, his suggestion
struck me as profound. I remembered it was the same advice Lynch
offered in his best-selling book.
Since then, I have integrated this idea into my investment
choices. Recently, I took an extreme look at the concept.
Drilling down, I asked myself: What single item do I and nearly
everyone else on the planet use on a daily basis?
My first and obvious answers were air and water. Aside from a
few niche hedge fund making a market in water rights and the
water company utilities, there wasn't much exciting news there.
No one has figured out how to commoditize the air we breathe, so
that option hit the skids, too.
Finally, I thought of toilet paper as being the single item
used by most everyone on a daily basis. Everyone from the
wealthiest people in the world to the most downtrodden use this
product at least once per day. The average person uses 20,805
sheets of toilet paper a year, according to online retailer
My next step was to locatestocks in this industry. One company
stood out above the rest as a top performer with plenty of
upside. That company is
Orchids Paper Products Co. (
||© 2013 Orchids Paper Products
Orchids Paper markets directly to consumers under
a variety of names, such as Colortex bathroom tissue.
Founded in 1976, Orchids Paper's product line consists of
bathroom tissue, paper towels and paper napkins. The company
markets directly to consumers under a variety of names through
assorted types of stores. It also sells "parent rolls" wholesale
to firms that label and market under their own brand names.
Orchids boasts a market cap of just over $216 million, annual
revenue of nearly $101 million and gross profit of $22.6 million.
Shares of TIS have risen 55% over the past 52 weeks, which
compares with the S&P 500's gain of just less than 16%.
Orchids' other appealing metrics include the more than 28% of
outstanding shares held by insiders, and the forward annual
dividend yield isn't shabby at 5%.
The company reported record net sales of $29 million in the
second quarter, and earnings before interest, taxes, depreciation
and amortization (EBITDA) climbed 27% to over $6 million.
Guidance was solid, with CEO Robert Snyder estimating that
converted product shipments in the second half of 2013 would be
at an annualized run rate of between 8.6 million and 9.1 million
What really attracted me to this company is the technical
picture. Shares have been in a solid uptrend since April 15. The
stock has recently hit resistance in the $28 area and is building
Risks to Consider:
This company certainly fits the "buy what you know" axiom.
However, like all other stock investments, it is not without
risk. Always be certain to diversify and use stop-losses when
Action to Take -->
I love this stock on a breakout close above $28. My nine-month
target price is $33, and the initial stop level should be just
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