10 Best Paper Stocks to Buy According to Hedge Funds

6. Clearwater Paper Corporation (NYSE:CLW)

Number of Hedge Fund Holders: 30

​​Clearwater Paper Corporation (NYSE:CLW) is a manufacturer specializing in bleached paperboard products used in folding cartons, liquid packaging, and food service applications, primarily serving North American packaging converters. The company operates three mills located in the US, along with several converting facilities. The US-based company ranked seventh on our 2024 list of 7 Best Paper Stocks To Buy Right Now.

Clearwater Paper Corporation (NYSE:CLW) completed two transformative transactions in 2024 – acquiring the Augusta paperboard facility, which increased paperboard capacity by 70%, and selling its tissue business for $1.06 billion. The Augusta acquisition positions CLW as a premier independent paperboard packaging supplier in North America, with the potential to contribute $140 million to $150 million in annual adjusted EBITDA once volume synergies are captured and industry utilization normalizes. The tissue business sale proceeds were used to significantly delever the balance sheet, resulting in a net leverage ratio of 1.1x by year-end.

While industry demand showed improvement, with shipments increasing 4% in 2024, utilization rates remained below historical averages at 85%, creating pricing and margin pressure. In response, Clearwater Paper Corporation (NYSE:CLW) is implementing $30 million to $40 million in cost savings for 2025, including a 10% reduction in workforce, and has secured a major long-term supply agreement to help fill open capacity. Management remains optimistic about medium-to-long-term prospects, expecting strong margins and cash flows through the cycle with mid-cycle margins of 13% to 14% and free cash flow conversion of 40% to 50%. We include CLW on our list of best paper stocks to buy as we believe management has taken the right steps to improve the company’s resilience and long-term free cash flow growth.