10 Best Paper Stocks to Buy According to Hedge Funds

7. Mercer International Inc. (NASDAQ:MERC)

Number of Hedge Fund Holders: 22

​​Mercer International Inc. (NASDAQ:MERC) is a global forest products company that produces market pulp and solid wood products in Germany, Canada, and the US. MERC manages large-scale pulp mills that produce northern bleached softwood and hardwood kraft pulps, as well as biomass-based green energy. The company’s key solid wood segment includes the manufacture of lumber, timber, and wood pallets, with its key facilities being located in Germany. The company’s leadership is ensured through diversification across products, a focus on innovative green energy as well as a large annual production that exceeds 2 million tons per year.

Mercer International Inc. (NASDAQ:MERC) reported a significant improvement in Q4 2024, with an operating EBITDA of $99 million, almost doubling if compared to Q3, driven by no planned maintenance downtime, a strong dollar, and higher sales volumes. For the full 2024 fiscal year, EBITDA increased substantially to $244 million from $17 million in 2023, attributed to stronger pulp markets, lower production costs from easing inflation pressures, and cost-reduction initiatives. The company successfully redeemed its $300 million 2026 senior notes using $200 million of additional 2028 senior notes and $100 million of cash on hand, representing a first step in its leverage reduction initiative.

Looking ahead, Mercer International Inc. (NASDAQ:MERC) faces both opportunities and challenges, with softwood pulp pricing expected to remain strong due to reduced supply and steady demand. The significant contrast between softwood and hardwood pulp supply-demand fundamentals is expected to drive price differences beyond historical norms, with the current net price gap in China at about $220 per tonne compared to the historical norm of $100. The company’s absolute priority for 2025 will be reducing leverage through strategic projects, including aggressive cost reduction programs, reliability improvements, operational rationalization, and prudent capital management. These initiatives are set to position the company well to withstand any potential market turmoil, which makes it one of the best paper stocks to buy now.