5. International Paper Co. (NYSE:IP)
Short % of Float As of September 13: 16.11%
Market Capitalization as of September 30: $17.04 billion
Number of Hedge Fund Holders: 44
International Paper Co. (NYSE:IP) is the world’s largest pulp and paper company, operating in numerous countries and serving a diverse customer base. Its products are used in a range of applications, including packaging for consumer goods, industrial products, and printing and writing papers, with a commitment to sustainability and environmental stewardship.
The company made $4.73 billion in Q2 2024 revenue, which, despite being lower than Street estimates, ended up improving 1.11% from a year-ago period. This was driven by improved pricing and mix, along with higher export and mix benefits. Its Industrial Packaging segment saw growth due to higher prices and favorable market conditions, while the Global Cellulose Fiber segment remained relatively stable despite some fluctuations in product demand.
The company has seen a decline in investor interest following the failure of a potential acquisition by Suzano. Investors had been anticipating a significant premium from the deal, but International Paper Co. (NYSE:IP) chose to remain independent rather than consolidate.
At the same time, it is in the process of acquiring DS Smith, a UK-based packaging company. This acquisition is anticipated to create significant value for shareholders by enhancing its operational capabilities and expanding its market presence.
CEO Andy Silvernail also introduced an 80/20 business process aimed at enhancing the company’s operational efficiency. This approach focuses on identifying and prioritizing the most profitable segments of their portfolio while optimizing costs and improving customer relations.
The company has a promising future, despite challenges. International Paper Co. (NYSE:IP) possesses a strong foundation, including a talented team, a rich history, and a significant opportunity for growth. By implementing a strategic approach focused on customer-driven strategies, cost optimization, and team alignment, it can achieve long-term success.
Diamond Hill Select Strategy stated the following regarding International Paper Company (NYSE:IP) in its Q2 2024 investor letter:
“Other top individual contributors in the quarter included Coherent and new holding International Paper Company (NYSE:IP). International Paper is one of the US’s largest manufacturers of containerboards, which is used to make corrugated boxes and other packaging materials. We expect that as the demand environment improves and the company focuses on its commercial execution, it will be able to improve profitability and bring operating margins back to normalized levels. Given what we view as an attractive valuation for a high-quality company, we capitalized on the opportunity to initiate a position in Q2. Shares subsequently rallied after reports that Brazilian company Suzano is interested in acquiring the company.”
