Whenever a stock hits new highs, investors sometimes have itchy fingers- to pull the "sell" trigger. It can be a guessing game as to whether the stock can climb higher, or whether it may be time to ring the register.
In the case of Amcor Limited (ASX: AMC), which hit a new 52-week high of $12.33 this month, I think there is still more room to run. If you originally bought the stock as a long-term holding, then you will want to pay more attention to the stock story rather than just the share price.
Is the story still good or has it gotten worse? If the business is alright and improving, then maybe ignore the new high and look at how the company is expanding.
Here are three reasons why you should stick with your Amcor shares.
1) It's more focused on its core businesses
Almost a year ago the global packaging company demerged from Orora Ltd (ASX: ORA) and is concentrating on it main money-making products such as food, beverage and medical product packaging where the demand is high. Also, several acquisitions in the past year already added about three percentage points to the company's growth, on top of strong organic profit growth coming from the emerging markets in Asia and Latin America.
2) Developing new product technology
The company has created a new way to make a beverage package (such as a pet bottle) and fill it with the beverage in the same step. The consumable liquid is used to form the container as it fills it on one machine. This saves up to 25% in operating costs, with more money potentially flowing to the bottom line. In addition, the company can licence the process, creating a new income stream.
3) More growth to come
Amcor had a very strong result in FY 2014, with earnings per share up 24.7%. FY 2015 full year earnings are projected to be higher. Its emerging markets businesses should continue to grow and further benefits from recent acquisitions are expected.
The company is focused on further potential acquisitions, especially to increase its footprint in emerging markets where it has the advantage of scale and technical know-how.
From these three reasons, you can see that Amcor's stock story is getting better. Investors who think as business owners will understand that Amcor is a good long-term grower. So stick with a market leader and winning stock for future returns.
