Plastics unfazed by Wall Street tumble
Plastics stocks weren't exactly crushed by the latest October slide on Wall Street, but the experience must have left many executives shaking their heads in disbelief.
What other reaction could they have? The economies of North America are roaring along. Interest rates are extremely low. Earnings announcements have been strong all year. The equities market should be as strong as a horse.
But a hiccup in Hong Kong, magnified by currency problems in Thailand, Malaysia and the Philippines, and some slightly weaker-than-expected earnings reports from U.S. companies, resulted in a day of breathtaking profit-taking on the U.S. exchanges.
As quickly as the correction came, it disappeared. Experienced stock-watchers have become accustomed to these occasional market blips, and they saw an opportunity to make a quick buck by investing in shares that were sure to come back strongly.
As a result, the Plastics News stock index was off just 6.65 percent for the month of October, a performance that was nearly identical to the Dow Jones Industrial Average, which dropped 6.33 percent. The Plastics News index is made up of 71 publicly held North American processors and compounders that derive at least 50 percent of their sales from plastics operations.
Many of the thinly traded firms on the index barely felt the dip, while six companies hit new 52-week lows.
What's the lesson? Is the global economy a bummer? Is it a victory for privately held firms, unbeholden to Wall Street?
No, it's not that simple. The global economy has provided much fuel for the current bull market, and a short-term problem anywhere in the world will have a tendency to rein in the optimism that drives continued growth. As long as peace and free trade thrive, the long-term direction will be positive.
And although this correction cooled the market a bit, just remember that while six companies reported record-low stock prices last month, 23 others on the Plastics News index registered 52-week highs in October.
Practically speaking, the stock market doesn't always make sense. But you could do a lot worse than betting on the ingenuity of profit-minded corporate executives.
Kudos to blow molders
This week's ranking of North American blow molders offers an opportunity to recognize the innovation and financial success that this market has enjoyed in the past decade.
Packaging makers were hit hard by the flurry of leveraged buyouts in the 1980s, and observers expected the LBOs to be the death of technological creativity.
But blow molders have been far in the forefront in recycling-related developments. Bottle makers have proven that they have the ability to use recycled plastics. Their customers, and ultimately consumers, have the responsibility now to use the capability.
Industrial blow molders also have benefited from new technologies, gaining the ability to tackle new markets, including fuel tanks.
Hats off to the blow molders.