TheStreet’s Jim Cramer says linerboard and paper company KapStone is poised to take off if the economy keeps getting hotter. Cramer explains that when an economy gets good, one of the things that happens is that linerboard, which he calls one of the truest tests of an economy, takes off in pricing. He says when you see a linerboard price increase, you tend to get another and another and another. These are fixed-cost plants which means the companies make a lot of money. He says plants that used to cost hundreds of millions now cost billions. Back then when linerboard prices went up and these companies wanted to expand, they would build new plants which would wreck the margins. Today, it would be too expensive to build new plants. So a company like KapStone can have multiple years of price increases without building new plants to wreck margins. Cramer advises investors to keep an eye on this company.
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