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[Cirrus]

Been buying OI and just added some more today. OI is a long-term turnaround play with significant value. Management/Insiders have bought recently. My thesis is based on management turnaround implementation and very low LT NG prices. NG is a very large portion of their costs (see below). As most know I'm long-term bearish on NG and fully expect the avg annual price to remain below 3 to 3.5ish for years to come. Management has implemented some margin expansion activities starting in 2007. This is a longer term play...potentially out a year or two depending. My stop is a weekly close below 18 and I'm looking for 40 minimum. It's currently trading at 8 times their 2012 estimates. Also pretty cheap on a cash flow basis. The daily chart looks promising. With the 10yr yield where it is I think there's value here and they feed into the international consumer staples market. Owens-Illinois (NYSE:OI) is the world's largest glass bottle manufacturer by revenue. OI's customers are primarily alcoholic beverage companies, although it also produces bottles for soft drink producers as well. Notable clients include Anheuser-Busch Companies (BUD) , H.J. Heinz Company (HNZ), and Pepsico (PEP).[1] The company earned $7.1 billion in revenue and $162 million in net income in 2009.[2] Until the beginning of 2008, the company also had the dubious honor of being one of the worst performing bottle manufacturers, with operating margins consistently below its peers. A combination of debt, rising commodity prices and litigation, led to several years low operating margins and net earnings losses. The company conducted a strategic review of its global profitability and manufacturing footprint in 2007, and decided to close or cut back production at 26 furnaces and eliminating more than 3,000 jobs. By doing so, the company hopes to increase profit margins.[3] Natural gas, used to fire glass making furnaces, represents between 15%-25% of OI's manufacturing costs.[4] Historically, glass bottle manufacturers have found it difficult to pass on price increases to their customers. OI, however, has made it a point to decrease the number of long-term contracts without provisions for price increases and grow the number of contracts with pass through provisions. While this has negatively impacted the company's volume, it has led to higher margins. OI also implemented a more aggressive hedging program (hedging approximately 50% of its expected natural gas consumption)

Edited by Cirrus, 01 February 2012 - 02:03 PM.