lpx just caught my attention today.. see a low of 1.03..wow , quite a run..that said. seem's to have some good momentum and a significant amount of call interest. sept and nov. looks to me like this could run to 10.00..jmho
• Who Owns the Upside? - Until we saw Louisiana-Pacific's balance sheet improvement during the second quarter, we questioned whether the current shareholders would receive just some or even none of the next upcycle's cash flow given the 11 straight quarters of negative EBITDA and liquidity concerns. With a return to "net cash," a $50-$70 million 3-year available (but expensive) revolver, nearly $400 million in gross cash, and less than $125 million in debt due before 2017, we say that today's shareholders (and warrant holders) own this upside! • Up to a $152 Million "Call Option" - LPX is suing the banks/brokers involved in selling it the now-illiquid $152 million in auctionrate securities that have been written down to $25 million (even though almost all of these securities are current on their stipulated distributions). We believe LPX could draw a settlement that brings in more than the current carrying value - while further enhancing liquidity. • The "Other Side" Could be Huge - LPX's main product, oriented strand board (OSB) panels used as the inner of "siding" in houses and other structures, is extremely volatile. After bumping along at depressed levels from 2002 through Memorial Day 2003, OSB tripled in price in less than 6 months. Our $2.15 "next peak" estimate assumes a $282/msf average OSB price, 12% less than the 2004 $321/msf average level when LPX made $4.35. • Don't Forget the Calendar - Two facts matter: first, spring follows winter and, second, LPX's stock has ALWAYS gone up (for 35 of 35 possible periods) from its October low to the first half of the following year. There are no exceptions going back to LPX's January 1973 spinoff from Georgia-Pacific. Our one-year target price is now $9, up from $4, and we are upgrading the stock rating to Outperform from Underperform.