In this article, we discuss the 11 best plastics stocks to buy now. If you want to see more stocks in this selection, check out the 5 Best Plastics Stocks To Buy Now.
According to a report published by Fortune Business Insights, the size of the plastics industry stood at $439.3 billion at the end of 2021 and grew by 4.2% in 2022 to $457.7 billion. The plastics industry is predicted to compound annually at an average rate of 5% to $$643.4 billion by 2029. The rapid pace of urbanization and industrialization in developing economies is expected to provide the industry with the growth impetus. Given its adaptability, low cost, and ease of production, plastic is rapidly replacing metals like aluminum and steel across numerous industries.
The US holds the greatest market share of the plastics industry in North America as of 2022, supported by rising consumer demand from the electrical, healthcare, and packaging sectors. The region has used recycled plastics more extensively as a result of concerns about pollution and the advancement of recyclable technologies. The plastics industry is seeing a major shift toward the production of sustainable products. This has brought into use the concepts of recycling, reusing, and upcycling plastic products into the limelight. The higher focus on lower greenhouse gas emissions has become an integral part of new product development and value addition.
Furthermore, the market for polymers is expected to expand significantly in Europe over the next decade as a result of the region’s expanding demand from the automobile industry. The widespread use of polymers in the region is further aided by their numerous beneficial features, such as superior heat resistance and corrosion inhibition. Some of the best plastics stocks, such as Exxon Mobil Corporation (NYSE:XOM), Myers Industries, Inc. (NYSE:MYE), and Amcor plc (NYSE:AMCR), are developing technologies to keep in line with the emerging trends and capitalize on the increasing demand.
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Our Methodology
We have shortlisted these stocks following an analysis of the emerging trends in the plastics industry. These companies have growth plans in place to capitalize on the latest developments in the industry and expand their customer base. We have discussed the analyst ratings and financial outlook for further context. These plastics stocks offer long-term value to investors, given their strong positioning in the market. Insider Monkey’s database of 895 hedge funds as of Q2 2022 has been utilized to rank these stocks.
Best Plastics Stocks To Buy Now
11. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 45
Dow Inc. (NYSE:DOW) is a Midland, Michigan-based corporation that produces a wide range of plastics for numerous industries across different parts of the world.
The Packaging and Specialty Plastics division is the biggest business unit of the company, contributing $7.3 billion to the top line during Q3 2022. The company also has a diversified basic materials portfolio with annual revenue of nearly $55 billion. Dow Inc. (NYSE:DOW) is preparing itself for an uncertain economic environment by developing a strategic plan that could result in a cost saving of over $1 billion in 2023. The company intends to achieve this target by leveraging its scale of operations and geographical diversity. Dow Inc. (NYSE:DOW) has observed that the demand in the US is not showing signs of weakness despite rising inflation rates.
Dow Inc. (NYSE:DOW) is considered to be one of the best plastics stocks due to its strong business fundamentals. The stock offers an annual forward dividend yield of 6.23%, along with a free cash flow (FCF) yield of 20% as of October 21. Furthermore, for the first half of the year, Dow Inc. (NYSE:DOW) recorded $3.06 billion in EBITDA in comparison to the average prediction of $2.85 billion. Analysts believe the stock is currently trading at a discount to its fair value.
10. LyondellBasell Industries N.V. (NYSE:LYB)
Number of Hedge Fund Holders: 37
LyondellBasell Industries N.V. (NYSE:LYB) is a Rotterdam, Netherlands-based corporation that has the distinction of being the biggest licensor of technologies for two basic raw materials, namely polypropylene and polyethylene, needed to make plastic goods.
LyondellBasell Industries N.V. (NYSE:LYB) has made it to our list of the best plastics stocks as it offers healthy returns to shareholders with an annual forward dividend yield of 6.03% as of October 21. Analysts think LyondellBasell Industries N.V. (NYSE:LYB) is well-positioned to counter the possible recessionary impacts due to its strong pricing power. In Q2 2022, the company’s operating activities produced $1.6 billion in cash with a return on invested capital (ROIC) of 24%. Furthermore, LyondellBasell Industries N.V. (NYSE:LYB) has sustained an EBITDA x cash conversion ratio of 91% over the last twelve months.
On October 20, LyondellBasell Industries N.V. (NYSE:LYB) revealed that it had signed a memorandum of understanding (MoU) with Shakti Plastic Industries, the biggest recycler of plastic scrap in India. Under the terms of the MoU, both entities will form a joint venture to develop a completely automated mechanical recycling plant in the second most populous country in the world. The plant will recycle plastic waste consumed by nearly 12.5 million citizens annually. The new facility is expected to be operational by the end of 2024.
Miller Howard Investments shared its outlook on LyondellBasell Industries N.V. (NYSE:LYB) in its Q3 2021 investor letter. Here’s what the firm said:
“We initiated a position in LyondellBasell (LYB). Chemical markets are currently robust given the combination of 2020 plant shutdowns and strongly recovering demand. Despite the tailwinds, Lyondell trades at a low valuation and yields just under 5%.”
9. Berry Global Group, Inc. (NYSE:BERY)
Number of Hedge Fund Holders: 37
Berry Global Group, Inc. (NYSE:BERY) is an Indiana-based producer and distributor of plastic packaging products with 300 facilities around the world.
In a research note issued on October 13, George Staphos at Bank of America assigned Berry Global Group, Inc. (NYSE:BERY) a target price of $72 and reiterated a Buy rating on the stock. Experts believe that the stock sell-off in the last two months has already priced in the weak Q3 2022 results and even a possibility of a downward revision of annual guidance. However, this provides an attractive opportunity for investors to go long on Berry Global Group, Inc. (NYSE:BERY). Keeping in view the growth prospects, analysts think the stock is trading at a discount to its fair value and offers defensive positioning in case of an economic recession. Berry Global Group, Inc. (NYSE:BERY) has also entered into an agreement with Mars Incorporated, to launch more environmentally sustainable packaging for its products.
Bonhoeffer Capital Management discussed its bullish outlook on Berry Global Group, Inc. (NYSE:BERY) in its Q2 2022 investor letter. Here’s what the firm said:
“As described in previous letters, our investment universe has been extended beyond value-oriented special situations to include growth-oriented firms using a value framework. This includes companies that generate growth through transition and consolidation. There have been modest changes within the portfolio in the last quarter in line with our low historical turnover rates. We sold some of our slowergrowing names and invested some of our cash into Thryv (described in the case study below) and Berry Global Group, as well as to fund the Millicom rights offering and oversubscription. There are also some interesting developments in the US digital marketing market that I discuss below.
One example of public LBO firms you have in your portfolio is Berry Global (Berry). Berry is a plastic and engineering materials packaging firm that provides packaging solutions to health, hygiene products, and consumer products firms in the United State and Europe. Berry’s growth model focuses on plastic and engineered materials continuing to take more shares of packaging from other materials, specifically in the health, hygiene, and consumer products realm where the growth is the strongest which provides 2- 3% annual growth. Synergistic M&A is adding an additional 3-4% per year to growth. These sources of growth are enhanced by opportunistic operational leverage from scale and share repurchases (5% annual growth). Over the past eight years, Berry’s net income margins doubled, with a 3x increase in revenues. These factors should lead to 10-12% EPS growth going forward. Berry has had 18% and 28% EPS growth over the past five and 10 years, respectively. Part of Berry’s strategy is to lever up to purchase a geographically expanding or complementary product packaging firm and pay the debt down with cash flows post acquisition, similar to private equity funds. Berry has done this three times since its IPO in 2011. Once debt is paid down a reasonable level, Berry has been repurchasing stock if another reasonably priced acquisition cannot be found. This strategy is similar to that of Asbury, described in previous letters. Compared to other packaging firms, Berry has amongst the highest inventory turns and margins. This has resulted in 25% to 40% returns on equity over the past five years. Berry currently trades for a FCF multiple of about 7.6x and a free cash flow yield of 13%. Berry’s BBBrated debt (with an EBITA coverage ratio of 6.2x) is currently yielding 6.2%, for a FCF-debt yield of 6.8%, which is high compared to the current market equity risk premium of about 5% and the projected growth in excess of the market. Given the projected EPS growth of 10% per year, Berry should trade at 29x earnings using Grahams’ formula of 8.5 + 2 * growth rate. Even at half this multiple—15x—Berry would trade at two times its current price.”
8. Westlake Corporation (NYSE:WLK)
Number of Hedge Fund Holders: 28
Westlake Corporation (NYSE:WLK) is a Houston, Texas-based global diversified industrial entity that is involved in the production of semi-finished thermoplastic products. The company produces more than 20 types of polymer and has 48 product variation that caters to the needs of numerous industries.
On October 11, Steve Byrne at Bank of America gave Westlake Corporation (NYSE:WLK) a target price of $120 and reiterated a Buy rating on the stock. The analyst noted that the valuation of the companies in the commodity chemical businesses like plastics is trading at a valuation that is close to the lows observed during the financial crisis of 2008. The analyst sees Westlake Corporation (NYSE:WLK) offering a potential upside of over 33% despite the US dollar gaining strength against major currencies of the world.
In Q2 2022, Westlake Corporation (NYSE:WLK) posted quarterly sales of $4.5 billion, reflecting a YoY increase of 57%. Furthermore, the company reported an impressive net income per share of $6.60. Following the quarterly results, Westlake Corporation (NYSE:WLK) raised its quarterly dividend by 20% to $0.357 per share. The company also increased its existing share buyback plan by a further $500 million.
7. AptarGroup, Inc. (NYSE:ATR)
Number of Hedge Fund Holders: 23
AptarGroup, Inc. (NYSE:ATR) is a Crystal Lake, Illinois-based materials science company with a headcount of over 13,000 employees spread across 20 countries.
The company is considered amongst the best plastics stocks as it has the distinction of creating the first recycled plastic beauty packaging solution in the world that is certified by the International Sustainability and Carbon Certification (ISCC). AptarGroup, Inc. (NYSE:ATR) has a heavy emphasis on fulfilling the plastic needs of the cosmetics and healthcare industries.
On October 13, George Staphos at Bank of America gave AptarGroup, Inc. (NYSE:ATR) stock a Buy rating with a target price of $112. The target price reflects a potential upside of over 16.5% from the closing price as of October 21. AptarGroup, Inc. (NYSE:ATR) has been able to pass on the higher raw material costs to its customers without facing a significant adverse impact on demand.
Upslope Capital Management shared its positive stance on AptarGroup, Inc. (NYSE:ATR) in its Q1 2022 investor letter. Here’s what the firm said:
“AptarGroup (NYSE:ATR): Specialty packaging business focused on pumps and sprayers, with a highly profitable, defensive, and growing Pharma unit. Misclassified and undervalued due to legacy/traditional packaging businesses (Food + Beverage, Beauty + Home), which contribute 60% of sales but just 15% of EBIT.”
As of Q2 2022, 23 hedge funds held a stake in AptarGroup, Inc. (NYSE:ATR).
6. Silgan Holdings Inc. (NYSE:SLGN)
Number of Hedge Fund Holders: 15
Silgan Holdings Inc. (NYSE:SLGN) is a Stamford, Connecticut-based consumer goods packaging corporation with 113 manufacturing facilities and a headcount of around 15,600 employees.
In a research note issued on October 14, Arun Viswanathan at RBC Capital gave Silgan Holdings Inc. (NYSE:SLGN) a target price of $53 and reiterated an Overweight rating on the stock. The analyst sees the favorable impact of lower raw material costs to benefit the company in the coming quarters. Silgan Holdings Inc. (NYSE:SLGN) is set to release its Q3 2022 results before the market opens on October 26. The consensus revenue and EPS estimate stand at $1.83 billion and $1.22, respectively. Silgan Holdings Inc. (NYSE:SLGN) has managed to outperform EPS estimates for the past eight consecutive quarters.
Upslope Capital Management shared its positive stance on Silgan Holdings Inc. (NYSE:SLGN) in its Q1 2022 investor letter. Here’s what the firm said:
“Silgan (NASDAQ:SLGN): Food can, dispensing system, and plastic packaging producer managed with a private equity mindset. Defensive end markets, attractive valuation and disciplined model make for attractive baseline investment with balance sheet optionality (M&A or capital return).”
Marshall Wace LLP raised its stake in Silgan Holdings Inc. (NYSE:SLGN) by over 1700% during Q2 2022.
Besides Silgan Holdings Inc. (NYSE:SLGN), investors are also bullish on Exxon Mobil Corporation (NYSE:XOM), Myers Industries, Inc. (NYSE:MYE), and Amcor plc (NYSE:AMCR).
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Disclose. None. 11 Best Plastics Stocks To Buy Now is originally published on Insider Monkey.
