In this article we discuss the 10 best packaging stocks to buy now. Packaging companies are experiencing a strong growth on the back of the e-commerce boom following the coronavirus pandemic. Analysts think that the packaging industry will see innovation and growth in 2021 and beyond. To skip our investment thesis and reasons to invest in packaging stocks, click to read 5 Best Packaging Stocks to Buy Now.
The packaging industry has a robust and long-term growth potential as its applications are widespread and evergreen. According to consultancy firm Smithers, packaging demand is expected to grow 2.8% to reach $1.05 trillion in 2024. Almost all essential and non-essential industries need some sort of packaging. The demand of packaging products is growing in lucrative domains like food, beverages, cosmetics, personal care, healthcare, industrial items and household products. The industry is usually segmented by the type of material, such as paper, plastic, glass and metal.
Coronavirus Crisis: Growth Catalyst for Packaging Stocks?
The packaging industry has proven to be extremely resilient and anti-fragile. In the midst of the coronavirus pandemic when most businesses struggled, packaging companies saw huge spikes in sales amid a rise in ecommerce. As businesses shift their focus towards online channels, they are recognizing the importance of packaging for brand image, customer satisfaction and marketing. According to a survey, a majority of sellers think that the use of branded packaging for online orders affects their perception. The COVID-19 pandemic skyrocketed ecommerce sales worldwide as consumers stopped going to physical stores and loaded up on groceries and other items using online channels. Data shows that consumers spent a whopping $347.26 billion online with U.S. retailers in the first 6 months of 2020, up 30.1% from $266.84 billion for the same period in 2019.
The ecommerce trend was already expanding globally as the “Amazon effect” put several physical retailers out of business, and analysts believe that online shopping will continue to grow in the future. Data shows that the e-commerce packaging market was valued at $27.04 billion in 2019 and is expected to reach $61.55 billion by 2025, growing at a CAGR of 14.59% over a period of 5 years.
In an April 2020 report, McKinsey said that the effect of the coronavirus crisis would be mixed for the packing industry, as the demand for certain packing items will decline while other categories will see explosive growth. The biggest winners will be the packing products for groceries, healthcare products, and e-commerce transportation, while the firm sees some declines for industrial, luxury, and some B2B-transport packaging. While selecting 10 best packaging stocks to buy now, we will incorporate the level of exposure to the growth categories in the industry.
In September, Moody’s changed its outlook for the global packing industry to positive from negative. The firm sees the industry’s global operating income to rise 6%-8% over the next 12 months.
The packaging industry has a lot of room for innovation and growth amid a demand of sustainable boxes, environment-friendly coverings, secure and protective packaging for electronics and fragile items. Companies are investing heavily in packaging technologies to provide greater flexibility and adaption for different surfaces, substrates and materials. Consumer companies also want smart, user-friendly and marketable packing products. For example, beverage companies pay a lot of attention to their packing design, position of words, fonts, image styling and material quality. These trends will enhance growth in the industry.
Our in-house analysis shows that we can use the sentiment information gathered from the hedge fund filings to classify in advance a select group of stocks that can beat the S&P 500 index by double digits annually on average. For instance, the portfolio of our monthly newsletter’s stock picks has beaten the market by over 88 percentage points since March 2017 (see the details here). Some of the portfolio holdings of our monthly newsletter have been shared online too. In October, we shared this real estate stock and since then, it’s been up nearly 50 percent.
Let’s see the 10 best packaging stocks to buy now, based on the fundamental economic health, growth catalysts and hedge fund sentiment around top packaging stocks in the U.S.
California-based Avery Dennison makes pressure-sensitive adhesive materials, branding labels and tags, RFID inlays, and specialty medical products. Avery Dennison shares have gained over 40% in the last 6 months. On Jan. 7, Avery stock was upgraded by Citi analyst Anthony Pettinari to Buy from Neutral with a price target of $181, up from $149. The analyst believes that the company will benefit from a strong recovery in the industry in the coming months.
Steve Cohen’s Point72 Asset Management is one of the leading shareholders of Avery Dennison entering the fourth quarter, with 297,759 shares, worth $38.1 million. Overall, 16 hedge funds in our database had stakes in the company by the end of the September quarter.
AMCR ranks 9th in our list of the best packaging stocks to buy now. Headquartered in Switzerland, Amcor plc makes flexible packaging, rigid containers, cartons, closures, food & beverage packing items. In November 2020, the company reported its fiscal Q1 earnings that jumped 20% on constant currency basis. For FY2021, Amcor increased its currency EPS growth to a range of 7% to 12%. The company also increased its quarterly dividend by 2.2%.
A total of 18 hedge funds tracked by Insider Monkey held stakes in Amcor as of the end of the third quarter. Among these funds is Jim Simons’ Renaissance Technologies, who owns 2,863,000 shares of the company, having a total worth of $31.64 million.
Reynolds ranks 8th in the list of 10 best packaging stocks to buy now. On Jan. 4, the stock was upgraded by RBC to Outperform from Sector Perform, with a price target of $35. RBC’s Nik Modi said that the rising demand in the eat-at-home sector will be a tailwind for the stock, as the coronavirus crisis has given rise to a long-lasting trend of food at home. John Smith Clark’s Southpoint Capital Advisors owns 3,800,000 shares of Reynolds Consumer, worth $116.36 million.
A total of 18 hedge funds in our system held stakes in the company as of the end of the third quarter. The net worth of these stakes is $239.81 million.
Packaging Corp. ranks 7th on the list of 10 best packaging stocks to buy now, as 23 hedge funds tracked by Insider Monkey held stakes in the company as of the end of the third quarter. The company’s stock is up over 47% in the last 6 months. In December 2020, the company increased its quarterly dividend by a whopping 26.6%. On Dec. 7, Packaging Corp. stock was upgraded by KeyBanc analyst Adam Josephson to Sector Weight from Underweight. The analyst said that the company’s balance sheet and returns are some of the best he has seen in the industry.
Sonoco stands 6th on the list of 10 best packaging stocks to buy now. The South Carolina-based company sells consumer products packaging, composite cans, tubes, and cores. In the third quarter, Sonoco reported an EPS of $0.86, beating the Street’s estimates by $0.04. The company’s consumer packaging segment experienced a strong growth in the quarter, mainly due to the solid demand of at-home food consumption. Protective Solutions segment also showed a strong rebound.
Over the last 6 months, Sonoco shares have gained over 18%. Ian Simm’s Impax Asset Management is one of the biggest shareholders of Sonoco, with 477,000 shares of the company, worth about $24.36 million.
Continue reading the list by clicking 5 Best Packaging Stocks to Buy Now.
- 16 Best Space Stocks To Buy Now
- Billionaire Louis Bacon’s Top 10 Picks
- 15 Best Undervalued Stocks To Buy Now
- 10 Best Energy Stocks To Buy