Tuesday, March 29, 2011

Schweitzer-Mauduit International Inc (NYSE: SWM) Q2 2011 Price Target

Recent price: 48.80$
P/E Ratio: 12.54
3 Months Target Price: 59$

Company Description
Data provided by Reuters tells us that, Schweitzer-Mauduit International, Inc. (SWM) is a multinational diversified producer of specialty papers. SWM manufactures and sells paper and reconstituted tobacco products to the tobacco industry, as well as specialized paper products for use in other applications. The primary products in the group include cigarette, plug wrap and base tipping papers, or Cigarette Papers, used to wrap various parts of a cigarette and reconstituted tobacco leaf (RTL), which is used as a blend with virgin tobacco in cigarettes, reconstituted tobacco wrappers and binders for cigars. These products are sold directly to the tobacco companies or their designated converters in the Americas, Europe and Asia. Non-tobacco products are a diverse mix of products that includes engineered papers, as well as commodity paper grades produced to maximize machine utilization. SWM operates and manages three segments: United States, France and Brazil.

Confidence Margins
Strong resistance $69.33 (+42%)
Light resistance $59.28 (+21%)
Light support $46.75 (-4%)
Strong support $42.62 (-13%)

The company is currently in the mist of a patent war with the Delfort Group since 2010, but it seems that the case is dragging at United States Patent and Trademark Office since they are re-examining U.S. Patent number 6,725,867. This stock has a lot of upside potential due to it's continued earning power.

Entry strategy
For the cautious investor:
Buy the stock for 49.50$ or less. There seems to be two or three days of downside left in the company, after which the company will strive.

For the risk-taking trader:
The June 2011 55$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 145$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 59$, or keep it until 69$ if you are more bullish in your own analysis. It is highly recommended to keep the position on check if it goes sour.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 59$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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