For those of you who don’t get the title’s reference, Teldar Paper was the fictional target of a hostile takeover by corporate raider Gordon Gekko in the now classic 1987 movie Wall Street. Michael Douglas played the Gordon Gekko character and went on to win the Academy Award for Best Actor for the role. Perhaps Douglas’s most famous line from Wall Street was delivered during a scene set at a Teldar Paper shareholders meeting where he sought to persuade investors to accept his takeover bid by encouraging, “…greed, for lack of a better word, is good.”
In the 30 years since “Wall Street” debuted, the paper industry has undergone major reorganization and consolidation of the sort that would have proven Gekko a visionary. Of the 16 forestry products manufacturers that were members of the Russell 1000® Index at the end of 1987, only four remain: Glatfelter (GLT), International Paper Co. (IP), Kimberly-Clark (KMB) and Sonoco Products (SON).1 The others were gobbled up by the four survivors or added as pieces of diversified portfolios held by companies like Koch Industries. If we play out the ending of “Wall Street” and assume Gekko’s legal troubles sank the Teldar deal, the company almost surely would have been scooped up by a competitor, or merged with one thereafter.
The Russell Style Indexes—segmenting market cap indexes into Growth/Value—also got their start in 1987 and have served witness to the dramatic changes in the US paper industry. The Russell Style Indexes categorize the members Russell 1000 Index as either “growth”, “value”, or some blend of the two styles. As a quick refresher: a growth company can be thought of as being more closely tied to the economic cycle and as being valued for potential future earnings vs. realized earnings; while companies with market prices that may be discounted relative to their earnings or other fundamental measures are commonly referred to as value stocks.
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