In this article, we will be taking a look at the 7 paper stocks to buy right now.
Trends and Challenges in the U.S. Paper Industry
The global paper industry faces challenges from digitalization and environmental concerns but sees growth in packaging and specialty papers. Key trends include a shift to sustainable, recyclable packaging, declining graphic paper demand, eco-friendly production processes, and rising demand in emerging markets.
In 2023, U.S. paper and paperboard capacity decreased by 1.6% to 79.7 million tons, marking a sharper decline compared to the average annual drop of 0.9% since 2014. Paper and paperboard production also saw a significant decrease of 7.2%, with reductions across all categories except tissue.
Since 2012, containerboard has accounted for over 50% of total paper and paperboard capacity, although it saw a slight decline of 0.7% in 2023, remaining near record levels due to prior growth. The printing and writing paper segment experienced a significant decrease, with capacity dropping 5.0% in 2023, now comprising just 12% of total capacity, down from 28% in 2000. Tissue capacity declined year over year by 0.9% in 2023 but has shown an average annual growth rate of 0.4% from 2014 to 2023.
In contrast, packaging paper capacity increased by 4.8% in 2023, driven primarily by growth in unbleached packaging papers. Financially, the U.S. paper manufacturing industry generated approximately $56.39 billion in revenue in 2023, with projections suggesting growth to $57.32 billion by 2032 at a compound annual growth rate (CAGR) of 0.17% from 2024 to 2032. From the start of the year to October 25, the industry is down 0.44%, based on the performance of the timber ETF managed by Blackrock. You can read more about the timber industry’s year-to-date performance in our article on 10 Worst-Performing Industries in 2024.
The forest products industry contributes about 5% of the US manufacturing GDP and employs 925,000 individuals, supporting over 2 million indirect jobs. Read more at 11 Best Paper Stocks to Buy Now.
Sustainability trends are shaping the pulp and paper industry, with companies adopting responsible forestry practices and increasing the use of recycled fiber to meet stakeholder expectations. According to McKinsey, 55% of American consumers are concerned about the environmental impact of paper products, highlighting the importance of circularity in addressing these issues.
In the foreseeable future, there will likely be an increase in the overall consumption of wood products. The entire use of wood products is expected to increase in 2060 compared to 2010, according to a report released by the science-based non-profit Union of Concerned Scientists. Interestingly, the pulp and paper industry is expected to account for the majority of the anticipated rise in the use of wood products by 2060.
Also, read 10 Best Land and Timber Stocks to Buy According to Hedge Funds and 15 Best Lumber Stocks to Buy Now.
An aerial view of a paper mill filled with massive rolls of papers.
Our Methodology
For our methodology, we selected stocks from the timber-industry-tracking ETF managed by Blackrock and ranked the best paper stocks to buy right now based on their total number of hedge fund holders as of Q2 2024.
“Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).”
Here is our list of the 7 best paper stocks to buy right now.
7. Clearwater Paper Corporation (NYSE:CLW)
Number of Hedge Fund Holders: 19
Clearwater Paper Corporation (NYSE:CLW) is a leading manufacturer of private-label tissue products and high-quality paperboard. The company primarily produces household tissue products such as paper towels, napkins, bathroom tissue, and facial tissue paper, as well as premium paperboard for packaging and printing applications.
Clearwater Paper Corporation (NYSE:CLW) is divesting its Tissue business to Sofidel America for $1.06 billion, with expected net proceeds of $850 million. This decision will help the company reduce debt, focus on its core Paperboard Products business, and pursue growth opportunities. The recent acquisition of the Augusta mill boosts production capacity, expands market presence, and offers potential synergies and cost savings.
In Q1 2024, Clearwater reported normalized EPS of $1.43, exceeding estimates by $0.32. The stock has gained 48.95% YTD, significantly outperforming the S&P 500’s 14.19% increase.
As of Q2 2024, 19 hedge funds held stakes in the stock in the Insider Monkey database. Out of these, the largest stakeholder was Renaissance Technology with shares worth $8,395,004.
Wasatch Micro Cap Value Strategy’s investor letter for the first quarter of 2024 said the following about Clearwater Paper Corporation (NYSE:CLW):
“As for our sales, we exited the RMR Group, Inc. (RMR) and Clearwater Paper Corporation (NYSE:CLW). RMR owns, develops, and manages real estate properties with a focus on senior-living communities, hotels, resorts, cruise ships, and full-service travel centers. Clearwater Paper manufactures consumer tissue, bleached paperboard, and wood products. We had invested in both companies when we thought they were inexpensive. After their stock prices rose to the point where we saw less upside, we decided to sell.”
6. Amcor PLC (NYSE:AMCR)
Number of Hedge Fund Holders: 21
Amcor PLC (NYSE:AMCR) is a global leader in packaging solutions, specializing in high-quality, responsible packaging for various industries. The company operates through two main segments: Flexibles and Rigid Packaging, with a focus on innovative solutions for food, beverage, pharmaceutical, and consumer goods. Amcor has shown global resilience and evolved significantly. In 2000, the company divested its paper goods business and has since grown through strategic acquisitions, including the $7 billion purchase of Bemis in 2019, solidifying its leadership in the global packaging industry.
Amcor PLC (NYSE:AMCR) concluded fiscal 2024 strongly, with its core business showing sequential improvement in volume and earnings growth. Fourth-quarter adjusted EPS rose 9%, exceeding April expectations, while volumes grew year-over-year due to increased customer demand and effective cost management, resulting in significant margin expansion. The company reported revenue of $3.54 billion in Q4 2024, down 3.7% from the previous year, and achieved annual adjusted free cash flow of $952 million, a 12% increase.
As of Q2 2024, there were 21 hedge fund holders that held stakes in the stock as tracked by Insider Monkey. The largest stakeholder in the stock, among those we tracked, was AQR Capital Management with shares worth $28,658,501.