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Will Reinvigorated Paper Companies Use Their Highflying Stock as Takeover Currency?

Also, more on Open Text and an age-old answer to an age-old question.

The Thursday Thud:

Paper profits:

So, let's say


is wrong in his column

yesterday and that this rally in cyclical stocks lasts longer than a day or two. Or that he's right and they go down but -- in quasi-cyclical fashion -- don't go as low as they once did and in the not-too-distant future come back again to even higher levels.

Doesn't really matter. The stocks of companies like

International Paper

(IP) - Get International Paper Company Report


Smurfit-Stone Container




(IR) - Get Ingersoll Rand Inc. Report


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Phelps Dodge

(PD) - Get PagerDuty, Inc. Report


Georgia Pacific




(WY) - Get Weyerhaeuser Company Report

have been on a tear.

What's that you say? Boh-ring! Not any more.

All have had spectacular runs; Georgia Pacific alone was up 6 5/8 to 91 1/8 yesterday. While nobody much cared, the paper industry went through a period of consolidation and streamlining, "and now they're starting to have a normal economic recovery type of thing," says one hedge fund manager who traffics in stodgy stocks. "People are starting to reorder, and economic growth is starting in Asia."

This same manager said that after listening to International Paper's conference call on Tuesday for an hour and 20 minutes, he was impressed by how "universally bullish" the company's execs were. Aren't they


bullish on a conference call? ("Congratulations, guys, nice quarter!") Sure, but this time they were talking about prices going up, volumes going up and costs going down thanks to a few mergers.

And that turns companies that haven't quite kept up into sitting ducks as these high stock prices turn into the same takeover currency that has driven deals in other industries. (So much for sitting on the sidelines while everybody else gets rich.)

Natural targets, say some industry watchers, include

Gaylord Container


. "Needs to do an up-and-out thing this cycle," says one Gaylord investor.



(LPX) - Get Louisiana-Pacific Corporation Report

. "It's a baby Georgia Pacific," says our stodgy hedge fund manager. "It has big exposure to timber and wood products and has been restructuring for two years. They need economic activity to see the benefits of some of that come through, but it has the best risk/reward ratio of any paper stock."

One certainty: If one company in the group gets taken out, the boards are sure to light up.

Open book on Open Text:


item on

Open Text

(OTEX) - Get Open Text Corporation Report

stirred the email masses because (unknown to me at the time) analyst Brandon Osten of

Sprott Securities

in Canada, who was quoted here, is the son of the CEO of

PC Docs

(DOCS) - Get Doximity, Inc. Class A Report

, another Canadian company that competes with Open Text. Indeed, he is.

Osten says Open Text actually tried to buy PC Docs, but PC Docs turned down the offer and is now being acquired by

Hummingbird Communications


in Toronto. Doesn't that make panning Open Text, by Osten, too close for comfort? Osten doesn't believe so. He says his comments in this column were limited to his view on Open Text's valuation, "and our valuation was based on the multiple. Any criticism of the shares has been based on valuations, not of the company itself."

What's more, nobody complained when he had a "buy" on the stock. "We picked up coverage before the

PC Docs bid came, and we had a buy with a target of 24, and that is still our target," he says. "The stock was 18 when we initiated coverage." It was 38 3/8 yesterday.

"When the stock went through our target price, we changed our recommendation. Our target price never changed the whole time, and our target is in line with where most other analysts were when we initiated coverage. We just didn't bring up our multiples the way others did."

Heck, I would have liked to know about PC Docs when I first called Osten. But at least he's consistent.

For the uninitiated:

Regular readers of this column, no doubt, are aware that every time a company is taken to task here, the message boards light up with speculation that I am either short the stock or am somehow profiting via some kind of dark-alley relationship with short-sellers.

The allegations have been raised again, in active chatter, on various message boards about whether either I or any of my "associates" have a short position in

Lernout & Hauspie


. (Yep, the same Lernout & Hauspie that still hasn't responded to this column's questions earlier this week about several of its dealings.)

So, let's go over it one more time (and let me know if I'm going too fast): Neither I nor any editorial employee of

is permitted to invest, long or short, in individual stocks (though they may own equity in

). In addition, according to this column's policy, I do not have investments in private hedge funds or partnerships. Sorry to disappoint. End of discussion.

Herb Greenberg writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at Greenberg writes a monthly column for Fortune and provides commentary for CNBC.