We recently published a list of 10 Best Paper Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Clearwater Paper Corporation (NYSE:CLW) stands against other best paper stocks to buy according to hedge funds.

Paper stocks encompass producers of paper, pulp, packaging products, toilet paper, and forestry operators. This sector typically thrives during periods of economic expansion when consumer spending, ecommerce activity, and industrial production are accelerating, driving higher demand for commercial packaging and consumer paper products. The performance of paper stocks strongly correlates with commodity prices of pulp and timber, as well as with the price of energy and freight, which are large cost inputs in the production chain. Consequently, paper-related stocks generally thrive in inflationary environments due to their pricing power, as producers can easily pass any inflation onto consumers and capture a margin of the price increase. Conversely, these stocks underperform during economic slowdowns as consumer demand and industrial activity fall, and lower commodity prices pressure profitability.

Some investors avoid this sector as they mistakenly consider it low growth and disrupted. Their perception is based on a tough 2010s decade marked by several challenges that pressured growth. Here is how AFRY Advisory commented on the paper market:

“With the universal move to digital communication, the demand for print has been on a steep decline, triggering massive shutdowns in the graphic paper sector and sizeable entries in the packaging board market through conversions and grade changes from graphics to packaging grades. The worldwide COVID-19 pandemic deepened the paper markets’ decline as decreasing economic activity and lockdowns further contracted the demand for graphics and office papers, while hygiene and corrugated packaging businesses recovered more effectively.”

READ ALSO: 10 Best Lumber Stocks To Buy Right Now

The struggles of the paper & paper products sector, as proxied by a timber ETF that includes many paper companies as well, extended into the 2020s. In early 2025, just before the US stock market entered correction mode, the sector reached a new all-time low relative to the broad market. Another global timber and wood ETF shows a similar picture – years of underperformance relative to the broad market, which killed most of the investor interest in this sector. Despite sluggish performance in the last years, we believe that the underfollowed paper sector may become favored in the following years due to a plethora of factors triggered by the new Trump 2.0 administration in the US.

First, we already know that paper stocks thrive during inflationary periods, and the US appears to have entered a multi-year period of above-average inflation due to the trade wars initiated by President Trump. Many of the paper companies have operations spanning several continents, with cultivation, processing, and selling often happening in two or three different countries, which means that the production chain may become subject to tariffs. Under such circumstances, paper companies will fully pass any inflationary pressures onto the end customer, meaning that they would capture a higher margin in absolute dollar value. The hypothesis of higher inflation in the US is fully supported by the 10-year US treasury yield climbing to 4.58% on April 11, significantly above the second half of 2024.

Second, the current US administration is a notorious proponent of onshoring, which means a partial or full return of manufacturing activity into the US. Paper stocks are positively correlated to the level of industrial and commerce activity in the US and could benefit from the accelerating demand for paper used in industrial and commercial packaging. In fact, the onshoring trend is already happening as several corporations, from semiconductors to automobile manufacturers and other consumer discretionary businesses, announced plans to boost their manufacturing presence in the US.

Our Methodology

We used a stock screener and thematic ETFs to identify companies engaged in the production of pulp, toilet paper, newspapers, cardboard, forest, and other paper-related products. Then we compared the list with Insider Monkey’s proprietary database of hedge funds’ ownership and included in the article the top 10 stocks with the largest number of hedge funds that own the stock as of Q4 2024. The stocks are ranked in ascending order of the hedge funds having stakes in them.

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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

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.

Overall, CLW ranks 6th on our list of best paper stocks to buy according to hedge funds. While we acknowledge the potential of CLW to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CLW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.