In this article, we will take a detailed look at the 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.”
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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.
With that being said, we may currently be at an opportune moment to acquire the best paper stocks at bargain valuations and all-time lows relative to the broad market, just before they enter a new era favored by inflation and onshoring trends.
An aerial view of a paper mill filled with massive rolls of papers.
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).
10. IT Tech Packaging, Inc. (NYSEAMERICAN:ITP)
Number of Hedge Fund Holders: 1
IT Tech Packaging, Inc. (NYSEAMERICAN:ITP) is a China-based company engaged in the production and distribution of paper products. The company manufactures corrugating medium paper, offset printing paper, tissue paper, digital photo paper, and non-medical single-use face masks. Its competitive advantage is based on strategic positioning in Northern China, near major industrial hubs, facilitating low-cost production and efficient distribution. With its large scale, ITP can cover most of China’s internal paper consumption needs while having additional capacity for export, which makes it one of the best paper stocks to consider.
IT Tech Packaging, Inc. (NYSEAMERICAN:ITP) reported a significant revenue increase of 59% YoY in the most recently reported Q3 2024, primarily driven by increased sales volume of corrugating medium paper (CMP), though partially offset by decreased average selling prices. The company achieved a notable turnaround in gross profit, reaching $1.92 million compared to a loss of $0.15 million in the same period last year, with the gross profit margin improving to 7.64%.
Despite the revenue growth, IT Tech Packaging, Inc. (NYSEAMERICAN:ITP) continued to face operational challenges, recording an operating loss of $1.46 million, though this represented an improvement from the $2.48 million loss in the same period last year. The company’s financial position showed some stability, with cash and bank balances of $4.41 million as of September 30, 2024, and a working capital of approximately $12.22 million. The company’s focus on CMP products has become more pronounced, with CMP sales accounting for 99.85% of total revenue during the quarter.
9. Suzano S.A. (NYSE:SUZ)
Number of Hedge Fund Holders: 13
Suzano S.A. (NYSE:SUZ) is a forestry-based company and one of the world’s largest producers of eucalyptus pulp. Its portfolio of product includes coated and uncoated printing and writing papers, paperboard, tissue papers, market and fluff pulps, and lignin. The company’s advantage stems from its large scale across Brazil, the US, the UK, and China, as well as it being a vertically integrated player, with operations including both cultivation and processing/manufacturing.
Suzano S.A. (NYSE:SUZ) delivered a strong operational performance in the recent Q4 2024, achieving record sales volumes and setting a new baseline for cash cost operations. The company generated a robust EBITDA of BRL 23.8 billion for the year, bringing leverage in dollar terms to 2.9x. The company’s Ribas mill demonstrated impressive performance, reaching 900,000 tons of production and 700,000 tons of sales in 2024, fully aligned with guidance provided after its mid-2024 start-up.
Looking forward, Suzano S.A. (NYSE:SUZ) faces a tight supply scenario in Q1 2025 due to low inventories and scheduled maintenance downtimes while simultaneously benefiting from positive market dynamics in China. The company successfully renegotiated all commercial contracts for the US, securing better terms for 2025 and onwards, along with synergies in raw materials and logistics. Management remains focused on deleveraging while maintaining a strong hedging strategy, with the company currently having around $7.5 billion in the hedging portfolio. With 13 hedge funds owning the stock at the end of Q4 2024, SUZ is one of the best paper stocks to buy.
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