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.
5. Graphic Packaging Holding Company (NYSE:GPK)
Number of Hedge Fund Holders: 27
Graphic Packaging Holding Company (NYSE:GPK) is a global leader in sustainable consumer packaging, specializing in paperboard and folding cartons for beverages and packaged foods. GPK operates mills across the U.S., producing recycled and coated paperboard for food-grade packaging.
Graphic Packaging’s innovative products, such as the KeelClip (a paperboard alternative to plastic rings for beverage multipacks) and PaperSeal (a barrier-lined paperboard tray replacing plastic MAP trays), demonstrate the company’s ability to create practical, sustainable alternatives to single-use plastics.
In Q2 2024, Graphic Packaging Holding Company (NYSE:GPK) experienced a decline in revenue to $1.5 billion, primarily driven by the divestiture of the Augusta, GA bleached paperboard manufacturing facility, reduced open market sales participation, and a net decline in sales from packaging operations, mainly due to price and mix adjustments. Despite this revenue decline, net income increased to $190 million ($0.62 per diluted share), up from $150 million ($0.49 per diluted share) in the same period last year. This improvement in bottom-line performance reflects the company’s ability to manage costs effectively.
As of Q2 2024, 27 hedge fund holders held stakes in the stock with Eminence Capital being the largest stakeholder from the ones tracked by Insider Monkey. The stock holds a Moderate Buy rating based on 11 Wall Street analysts. In the past three months, analysts have provided 12-month price targets for Graphic Packaging. The average price target is $32.72, indicating a potential increase of 10.99% from the current price of $29.48. The forecasts range from a low of $24.00 to a high of $37.20.
4. Packaging Corporation of America (NYSE:PKG)
Number of Hedge Fund Holders: 28
Packaging Corporation of America (NYSE:PKG) is a leading producer of containerboard and corrugated packaging products in the United States. The company manufactures a wide range of custom corrugated packaging solutions, including boxes, containers, and displays, as well as container boards used in the production of these products.
Packaging Corporation of America (NYSE:PKG) has established industry benchmarks, being the first U.S. containerboard company to earn ISO certification for its linerboard and semi-chemical medium mills. Its Counce, Tennessee paper mill received the “America’s Best Plants” award from IndustryWeek magazine, marking it as the first paper mill to achieve this recognition. Additionally, PCA’s strategic acquisitions and expansions, including a $440 million project in 2021 to convert a paper machine at its Alabama mill for linerboard production, have strengthened its market position and expanded its capabilities.
PKG’s net sales rose to $2.1 billion in Q2 2024, up 5% from $2 billion in Q2 2023, driven by improved demand in the Packaging segment, record containerboard production, and higher prices. Net income slightly decreased to $199 million from $209 million in the same quarter last year, but the company’s overall financial position remains robust.
Among the 28 hedge funds holding PKG in the Insider Monkey database, the largest stakeholder was Millenium Management with shares worth $187,595,918. The stock holds a Moderate Buy rating based on 6 Wall Street analysts. Analysts have provided 12-month price targets for Packaging over the last three months. The average target is $217.00, with a high of $235.00 and a low of $195.00, representing a -2.13% change from the last price of $221.73.
3. Avery Dennison Corporation (NYSE:AVY)
Number of Hedge Fund Holders: 33
Avery Dennison Corporation (NYSE:AVY) is a global materials science and digital identification solutions company that designs and manufactures adhesive labels, tags, and branding materials for industries such as retail, e-commerce, logistics, food, pharmaceuticals, and automotive.
In Q2 2024, Avery Dennison Corporation (NYSE:AVY) reported earnings per share (EPS) of $2.42, a 26% year-over-year increase. The Materials segment experienced a 6% organic sales growth, rebounding from last year’s inventory destocking, with significant volume increases in Europe and Asia. The adjusted EBITDA margin improved to 17.9%, up over two percentage points due to enhanced productivity. Meanwhile, the Solutions Group saw an 11% rise in organic sales and a 16.8% adjusted EBITDA margin, driven by increased volumes in the apparel sector and intelligent labels.
Avery Dennison Corporation (NYSE:AVY)’s free cash flow of $201 million in the first half of 2024, up by $137 million from the previous year, highlights strong financial health. This cash flow increase enhances financial flexibility, supports dividends and share buybacks, and funds growth and acquisitions. The net debt-to-adjusted EBITDA ratio of 2.2x reflects manageable debt and operational stability, allowing for potential strategic borrowing. For investors, these metrics signal robust cash generation, financial discipline, and a foundation for growth, positioning the company to deliver continued shareholder value.
Strategic investments in intelligent labels and new customer rollouts in high-value sectors like logistics and food are expected to support ongoing growth. Additionally, on April 9, Avery Dennison introduced new electrode fixing tapes for electric vehicle (EV) battery assembly, aimed at boosting sluggish sales growth.
As of Q2 2024, 33 hedge funds held stakes in the stock in the Insider Monkey database. The largest stakeholder out of these was Cartenna Capital, holding shares worth $42,636,750. The stock holds a Moderate Buy rating based on 9 Wall Street analysts. In the last three months, analysts set a 12-month price target for Avery Dennison, averaging $242.38. The forecasts range from a low of $207.00 to a high of $275.00, representing a 12.77% increase from the current price of $214.93.
2. Weyerhaeuser Company (NYSE:WY)
Number of Hedge Fund Holders: 36
Weyerhaeuser Company (NYSE:WY), founded in 1900, is a leading timber, land, and forest products company that manages extensive forest resources and manufactures various wood products. It operates through three main segments: Timberlands, Wood Products, and Real Estate, Energy & Natural Resources.
What sets Weyerhaeuser apart is its integrated approach to forest management and wood products manufacturing. The company owns and manages 10.5 million acres of timberlands in the U.S., making it one of the world’s largest private landowners.
Weyerhaeuser is leveraging its timberlands to grow revenue from carbon markets, aiming for $100 million in Adjusted EBITDA from Natural Climate Solutions by 2025—a fivefold increase. The company, which is significantly carbon-negative, stores billions of metric tons of CO₂ in its U.S. timberlands, positioning it well in a carbon-conscious market. Weyerhaeuser is also pursuing $175–$250 million in operational improvements and plans to invest $1 billion in expanding its sustainable forestry portfolio by 2025. These efforts support a 5% annual dividend growth target tied to Timberlands and Natural Climate Solutions.
In the latest earnings report announced on July 25, Weyerhaeuser Company (NYSE:WY) reported a normalized FFO (Funds from Operations) of $0.44, beating expectations by $0.03. The GAAP EPS was $0.24, also exceeding forecasts by $0.03. Revenue totaled $1.94 billion but missed projections by $34.06 million.
As of Q2 2024, 36 hedge funds in the Insider Monkey database held WY. The largest stakeholder, among the ones we tracked, was First Eagle Investment Management, holding shares worth $402,987,418. The stock also holds a Moderate Buy rating based on 5 Wall Street analysts. Analysts have set a 12-month price target for Weyerhaeuser, averaging $38.00, with a high of $41.00 and a low of $36.00. This represents a potential 13.60% increase from the current price of $33.45.
1. International Paper Company (NYSE:IP)
Number of Hedge Fund Holders: 44
International Paper Company (NYSE:IP) is a leading global producer of renewable fiber-based packaging and pulp products. The company transforms renewable resources into essential items that people rely on daily, including corrugated packaging for shipping and retail, pulp for diapers and personal care products, and paper for various applications.
International Paper Company (NYSE:IP) reported Q2 2024 revenue of $4.73 billion, slightly below Wall Street estimates but up 1.11% year-over-year, driven by improved pricing, higher exports, and relatively favorable market conditions in its Industrial Packaging segment. While the Global Cellulose Fiber segment remained stable despite fluctuating demand, investor interest has declined following the failure of a potential acquisition by Suzano, as investors had hoped for a significant premium.
However, International Paper is in the process of acquiring UK-based DS Smith, expected to enhance operational capabilities and market presence. The company has a solid foundation and a promising future, focusing on customer-driven strategies, cost optimization, and team alignment for 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.”
Overall, IP ranks first among the 7 best paper stocks to buy now. While we acknowledge the potential of paper companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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