Berry Global (BERY) Has Risen 29% in Last One Year, Outperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of Rhizome Partners top stock picks. Rhizome Partners, an investment management firm, is bullish on Berry Global Group Inc. (NYSE:BERY) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Berry Global Group Inc. (NYSE:BERY) stock. Berry Global Group Inc. (NYSE:BERY) is a producer and marketer of plastic packaging products.

In September 2019, Rhizome Partners had released its Q2 2019 investor letter. Berry Global Group Inc. (NYSE:BERY) stock has posted a return of 29.5% in the trailing one year period, outperforming the S&P 500 Index which returned 16.1% in the same period. This suggests that the investment firm was right in its decision. On a year-to-date basis, Berry Global Group Inc. (NYSE:BERY) stock has risen by 3.9%.

In Q2 2019 investor letter, Rhizome Partners said the fund posted a return of 2.0% in the second quarter of 2019, underperforming the S&P 500 Index which returned 4.30% in the same period. Let’s take a look at comments made by Rhizome Partners about Berry Global Group Inc. (NYSE:BERY) stock in the Q2 2019 investor letter.

“Berry Global – The Company makes plastic packaging such as plastic containers, films, tapes, bags, and liners under their Consumer Packaging, Health, Hygiene, & Specialties and Engineered Materials divisions. Berry enjoys structural scale advantages over its smaller peers through discounts in raw materials purchasing.

Q2 2019 Updates – Since the beginning of the year, Berry has experienced organic EBITDA declines in its Engineered Materials and Health, Hygiene, & Specialties divisions. Per management’s commentary, the decline in Engineered Materials’ EBITDA is due to attempts to reduce the weight of their products. This resulted in disruption inside the business. We chatted with a customer of Berry during a packaging conference at the Javits Center in New York City. He confirmed that there have been quality issues with Berry’s stretch films and he has returned products to Berry on couple of occasions. We believe this is the reason that there is a 12% decline in EBITDA within the division despite the small drops in volume. However, the customer also mentioned that he continues to buy from Berry because Berry has worked diligently with him to resolve these quality issues. The impacts from this issue will likely take a couple of quarters to be resolved. Public equity holders are notorious for their fickle responses. This is especially so when a company is levered at 5 times EBITDA. For most shareholders, 2‐4 quarters might as well be an eternity.

On the Health, Hygiene, and Specialty side, Berry suffers from low volumes of diapers due to low birth rates in North America. Berry has invested in adult incontinence care and feminine products which are growth categories. However, transitions take time and Wall Street has little patience. In the meantime, Berry continues to generate a prodigious amount of free cash flow. While Berry is a zero to low growth business, its free cash flow generation is almost “bond like.” After the RPC acquisition, Berry’s valuation and capital structure now resembles that of private equity deals during the “golden age.” We estimate that Berry trades at a 13% free cash flow yield at quarter end. We believe this is extremely cheap despite a five times debt‐to‐ EBITDA ratio.”

Last month, we published an article revealing Rhizome Partners bullish investment thesis on Berry Global Group Inc. (NYSE:BERY) stock in its Q2 2020 investor letter. This suggests that the investment firm has been bullish for a long time on Berry Global Group Inc. (NYSE:BERY).

In Q2 2020, the number of bullish hedge fund positions on Berry Global Group Inc. (NYSE:BERY) stock increased by about 18% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Berry Global’s growth potential. Our calculations showed that Berry Global Group Inc. (NYSE:BERY) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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