In this article, we discuss 11 best paper stocks to buy now. You can skip our detailed analysis of the paper and pulp sector, and go directly to read 5 Best Paper Stocks To Buy Now.
The paper industry has not suffered as much as anticipated due to digitalization. While the growth rate has slowed down compared to the past, the paper and forest products industry is still expanding. One of the main reasons for this expansion is the surge in online shopping during the pandemic, which has led to a significant rise in the need for packaging materials. Additionally, increased consumer emphasis on health and safety has resulted in a strong demand for tissue products whose market size is expected to exceed $120 billion by 2029.
Research indicates that paper products are here to stay and the total consumption of wood products is expected to grow for the foreseeable future. According to a paper published by the Union of Concerned Scientists, a science-based non-profit organization, the total consumption of wood products is predicted to be higher in 2060 compared to 2010. Notably, the projected increase in wood product consumption by 2060 will be primarily seen in the pulp and paper sector.
The US forest products industry is a major manufacturing sector, encompassing various stages of production. This includes logging operations, wood product facilities, pulp and paper mills, as well as paper-based packaging plants and recycling mills that recycle paper materials into new daily products. According to American Forest and Paper Association, the forest products industry significantly contributes to the overall national economy, accounting for around 5% of the manufacturing GDP in the US. The association also mentioned that forest products jobs not only employ approximately 925,000 individuals but also generate additional wealth within their communities by supporting over 2 million indirect jobs.
Today, several trends are shaping the pulp and paper industry. It has made significant strides in promoting sustainability and reducing its environmental impact. Many companies in the industry have implemented responsible forestry practices, such as certified sustainable forest management and increased usage of recycled fibers. These practices can help companies meet stakeholders’ expectations and enhance their reputation as environmentally conscious organizations. According to a report by McKinsey & Company, 55% of American consumers express significant concern about the environmental impact of paper products and packaging, recognizing that circularity is just one aspect of the larger issue.
When discussing paper stocks, it is important to note that the publishing industry is a significant component of the overall paper industry. The publishing industry in the UK has shown resilience in the face of inflation last year. The industry achieved total sales of £6.9 billion in 2022, representing a 4% increase compared to the previous year, as reported by The Guardian. Additionally, a record-breaking 669 million physical books were sold, marking the highest level of sales ever recorded.
Also read: 20 Biggest Publishing Companies in the World
Paper stocks in the United States also maintained stable performance despite the challenges posed by inflation and high-interest rates, unlike several other major industries that experienced significant declines. iShares Global Timber and Forestry ETF, which tracks the performance of global companies involved in the timber and forestry industry, is down 1.96% year-to-date, as of July 5. Some of the best paper stocks that are grabbing investors’ attention include Sylvamo Corporation (NYSE:SLVM), Kimberly-Clark Corporation (NYSE:KMB), and International Paper Company (NYSE:IP), among others that are mentioned below.
Pixabay/Public Domain
Our Methodology:
For this article, we scanned Insider Monkey’s database of 943 hedge funds as of Q1 2023 and picked companies that are involved in the production of pulp and paper, wood products, and forest management. From that list, we picked 11 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them.
11. Suzano S.A. (NYSE:SUZ)
Number of Hedge Fund Holders: 8
Suzano S.A. (NYSE:SUZ) is a Brazilian company and one of the largest pulp and paper producers in the world. The company specializes in the production of eucalyptus pulp, which is used in the manufacturing of various products such as tissue, printing and writing paper, packaging materials, and specialty papers.
In addition to Sylvamo Corporation (NYSE:SLVM), Kimberly-Clark Corporation (NYSE:KMB), and International Paper Company (NYSE:IP), Suzano S.A. (NYSE:SUZ) is one of the best paper stocks to consider.
In the first quarter of 2023, Suzano S.A. (NYSE:SUZ) reported year-over-year growth in its pulp sales by 3% to 2,455 thousand tons. The company’s revenue for the quarter came in at R$11.2 billion and its net income amounted to R$5.24 billion. It generated roughly R$4 billion in operating cash flow during the quarter, which showed a 17% growth from the same period last year.
At the end of Q1 2023, 8 hedge funds in Insider Monkey’s database owned stakes in Suzano S.A. (NYSE:SUZ), compared with 9 in the previous quarter. These stakes have a total value of over $58.7 million.
Baron Funds mentioned Suzano S.A. (NYSE:SUZ) in its Q1 2023 investor letter. Here is what the firm has to say:
“Suzano S.A. (NYSE:SUZ) is the world’s largest and lowest-cost producer of pulp, which is primarily used in paper, tissue, and packaging. Shares declined due to falling pulp prices as a result of weaker global demand. We retain conviction. Suzano is expanding into new, higher-margin markets for pulp with fossil-to-fiber substitution for textile, plastics, fuels, and chemicals. Suzano’s pulp production removes more greenhouse gas emissions from the atmosphere than it emits. Its goal is to remove 40 million tons of CO2 over the next five years, and we see an opportunity for the company to monetize these carbon credits. In addition to our positive view on pulp prices, we expect sustainability/ESG factors to drive multiple positive re-ratings for Suzano.”
10. Clearwater Paper Corporation (NYSE:CLW)
Number of Hedge Fund Holders: 13
Clearwater Paper Corporation (NYSE:CLW) is a Washington-based company that specializes in the manufacturing and selling of private-label tissue, paperboard, and pulp-based products. The company’s main businesses are consumer products, pulp, and paperboard, which makes it one of the best paper stocks on our list.
In the first quarter of 2023, Clearwater Paper Corporation (NYSE:CLW) reported revenue of $525 million, which showed a 7.6% growth from the same period last year. At the end of March 31, the company had over $16.7 million available in cash and cash equivalents and its total assets amounted to $1.7 billion.
In April, RBC Capital upgraded Clearwater Paper Corporation (NYSE:CLW) to Outperform and also lifted its price target on the stock to $42. The firm presented a positive outlook on the company’s businesses this year.
At the end of Q1 2023, 13 hedge funds tracked by Insider Monkey owned stakes in Clearwater Paper Corporation (NYSE:CLW), compared with 15 in the past quarter. The consolidated value of these stakes is roughly $40 million. Among these funds, Medina Value Partners was the company’s leading stakeholder in Q1.
9. Mercer International Inc. (NASDAQ:MERC)
Number of Hedge Fund Holders: 13
Mercer International Inc. (NASDAQ:MERC) is a Canadian global forest company that operates in the pulp and paper industry. The company is involved in the production of northern bleached softwood kraft pulp, a type of high-quality pulp used in various applications. It is among the best paper stocks on our list.
Mercer International Inc. (NASDAQ:MERC) reported revenue of $522.6 million in the first quarter of 2023, which beat analysts’ estimates by $9.97 million. The company ended the quarter with $300.6 million in cash and cash equivalents and had over $2.7 billion in total assets.
Mercer International Inc. (NASDAQ:MERC) is also a dividend company and currently pays a quarterly dividend of $0.075 per share for a dividend yield of 3.62%, as of July 5.
At the end of the March quarter, 13 hedge funds in Insider Monkey’s database reported having stakes in Mercer International Inc. (NASDAQ:MERC), worth collectively over $46 million. With roughly 2 million shares, Redwood Capital Management was the company’s leading stakeholder in Q1.
8. Rayonier Advanced Materials Inc. (NYSE:RYAM)
Number of Hedge Fund Holders: 15
Rayonier Advanced Materials Inc. (NYSE:RYAM) is an American company that specializes in the production of high-quality cellulose and other related products. The company also manufactures high-yield pulp, paperboard, lumber, and newsprint.
In May, RBC Capital upgraded Rayonier Advanced Materials Inc. (NYSE:RYAM) to Outperform, presenting a positive outlook for the paper and pulp sector. The firm also mentioned that the company is well-positioned to recover specialty demand in the second half of the year.
In the first quarter of 2023, Rayonier Advanced Materials Inc. (NYSE:RYAM)’s revenue showed a 32.7% year-over-year growth at $467 million. The company’s cash flow also remained strong as it reported an operating cash flow of $51 million and a free cash flow of $36 million.
Rayonier Advanced Materials Inc. (NYSE:RYAM) was a part of 15 hedge fund portfolios at the end of Q1 2023, according to Insider Monkey’s database. The stakes owned by these hedge funds have a total value of over $66.2 million.
7. Glatfelter Corporation (NYSE:GLT)
Number of Hedge Fund Holders: 16
Glatfelter Corporation (NYSE:GLT) is a North Carolina-based company that manufactures specialty papers and engineered materials. These papers include products such as tea and coffee filter papers, book publishing papers, carbonless papers, envelopes, and packaging materials. Glatfelter’s specialty papers are known for their high quality, consistency, and performance in specialized markets.
In the first quarter of 2023, Glatfelter Corporation (NYSE:GLT) reported revenue of $378.2 million, which fell slightly from $381.6 million in the prior-year quarter. The company’s operating cash flow for the quarter came in at $35.6 million and its free cash flow stood at$28.2 million.
At the end of Q1 2023, 16 hedge funds tracked by Insider Monkey were long Glatfelter Corporation (NYSE:GLT), compared with 18 in the preceding quarter. The stakes owned by these hedge funds have a consolidated value of over $37.8 million.
6. Pactiv Evergreen Inc. (NASDAQ:PTVE)
Number of Hedge Fund Holders: 19
Pactiv Evergreen Inc. (NASDAQ:PTVE) ranks sixth on our list of the best paper stocks. The company manufactures a range of food packaging and food service products, which often include paper-based materials. This can include paperboard, carton board, and other paper-based substrates used for containers, trays, cups, and other food packaging items. Other popular paper stocks include Sylvamo Corporation (NYSE:SLVM), Kimberly-Clark Corporation (NYSE:KMB), and International Paper Company (NYSE:IP).
On May 8, Pactiv Evergreen Inc. (NASDAQ:PTVE) declared a quarterly dividend of $0.10 per share, which was in line with its previous dividend. The stock has a dividend yield of 5.19%, as recorded on July 5. In the first quarter of 2023, the company reported revenue of $1.43 billion, which surpassed analysts’ estimates by $10 million. Its operating cash flow for the quarter amounted to $88 million and its free cash flow came in at $25 million.
As of the close of Q1 2023, 19 hedge funds in Insider Monkey’s database reported having stakes in Pactiv Evergreen Inc. (NASDAQ:PTVE), the same as in the previous quarter. These stakes have a total value of over $62 million. Ken Griffin, Kris Medina, and David Rosen were some of the company’s leading stakeholders in Q1.
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Disclosure. None. 11 Best Paper Stocks To Buy Now is originally published on Insider Monkey.