Jim:    There's always a bull market somewhere... but no one said it had to be somewhere interesting...

Right now, I think the paper and packaging companies... the guys who make everything from corrugated cardboard... or, as it's known in the industry, container board... are in the sweet spot.

The cardboard box makers... this is a boring business... maybe more boring than watching paint dry, or peel for that matter... but it can be plenty profitable at the right moment, and that right moment is now...

This undynamic industry put through a $55 per ton container board price increase in July, up to $610 bucks... I actually follow container board pretty well, from over the years... that's big. Something I said would happen when I recommended Temple-Inland Inc. (TIN), at $13.98, on April 7th. The stock is now up 37%...

I think it's time to swap out of TIN, and move into Packaging Corp. of America (PKG)... which, compared to the stock of TIN, has done next to nothing.

This is the paper play that hasn't participated in the move... a move that even lumbering giant, International Paper (IP), which is losing share, has played a part in. In fact, IP's showing signs that prices will get even higher, as it just put through a price increase in liner board, and is now charging a record $670 a ton.

Packaging Corp. of America (PKG)?... It's a "catch up" trade...

At $26, the stock is up a little less than 3 points from the market's July 15th bottom, and I think it can go much higher, on the strength of the paper business. Look at TIN... It's not any better than PKG, but it soared...

The stock's also a happier-days-are-here-again play...

One of the big costs for paper companies is energy. Actually, it's probably the single biggest, other than labor... 50% of PKG's energy costs come from coal... boy, that price has come down... Another 9% comes from natural gas... whoa, shocking declines in both of these commodities... They should improve PKG's earnings... especially when you realize that it's also charging higher prices... putting through price increases, right?...

A price increase comes in, and input costs come down... For a while, I've been saying that this combination equals upside surprise, and I don't see why it would be any different for PKG.

There's another reason why we like PKG over the rest of the industry right now... and I know I invoke this rule a lot, but I will continue to do so, because it's an important one...

It's the Sir-Mix-A-Lot second corollary... I like big yields and I cannot lie...

PKG has a 4.7% dividend yield. That's better than TIN's 2.2% yield, and better than IP's 3.4% yield. Heck, it's better than Treasuries (bonds), without even taking into account the tax-favored treatment of dividends, although we might lose that and go back to the bad old days of, well, much higher rates of dividend taxation if Obama wins... but, for now, you only pay 15% on your dividend income.

PKG is paying you to wait to catch up the rest of the paper business...

When it comes to container board, we got that price increase but, according to a survey done by Long Bow... that's a boutique outfit... 48% of respondents said that supplies of container board were tighter in August than in July... amazing, even with a slow economy... when the price increase came through. 45% said that supplies were just as tight... And you know what it is? It's outages. There have been unplanned mill outages across the country that have helped keep supplies tight.

Hurricane Gustav, for example, knocked out about 30,000 tons of total container board capacity. Who knows what's going to be knocked out by this storm?...

Container board exports were up 16% in July and, even though demand for this stuff isn't so hot, the tight supply and high prices are more than making up for any shortage of buyers.

Now, another way you measure this... remember, every industry has a metric... inventories... container board inventories are very lean. Only 25,000 tons of inventory was added in July. That's one-third of the 75,000-ton average over the last 10 years. That's going to mean more price increases...

The Street's expecting another container price increase before the end of the year...

I want to buy PKG before that increase goes through. At $26, I think the stock represents a terrific value.

Look, on a multiple basis, it's a little high... It trades at 13.5x earnings, but it's earnings short term should grow at 24%. That's next year. Remember what mutual funds like to see... big year-over-year earnings growth. They're controlling a lot of this market, and PKG can give them that growth... they're desperate for it... and you also get that 4.7% yield.

Here's the bottom line...

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The Bottom Line!:     I think it's time - because of "catch up" - that you swap out of Temple-Inland Inc. (TIN) and move into Packaging Corp. of America (PKG)... our big dividend, paper "catch up" play...