We recently compiled a list of the 9 Best Plastics and Rubber Stocks to Buy. In this article, we are going to take a look at where Berry Global Group Inc. (NYSE:BERY) stands against the other plastic and rubber stocks.
The global plastics and rubber products market is expected to observe consistent growth in the coming years. The market is expected to expand from $1.46 trillion in 2023 to $1.57 trillion in 2024, reflecting a healthy 7.3% annual growth rate. This positive trend is predicted to continue, with the market reaching a projected size of $2.05 trillion by 2028 at a 6.9% annual growth rate.
Several factors are fueling this growth, including the rise of manufacturing and advancements in the medical and healthcare sectors. The growing demand for tires in the automotive industry is also boosting the market. Tires, which are important for providing traction and supporting vehicle weight, depend significantly on rubber as a primary material.
For instance, a February 2023 report by the US Tire Manufacturers Association (USTMA) shared that tire shipments in the US are on an upward trajectory, rising from 332 million units in 2021 to 332.7 million units in 2022.
Recent trends in the US plastics and rubber product manufacturing sector highlight a rise in research and development (R&D) investment. Data collected by Source Advisors indicates a 19.4% increase in R&D compared to the previous year, signaling strong growth in innovation activities. The sector has invested a total of $3.1 billion in R&D, an increase from $2.6 billion the previous year. This rise in investment is double the US average for the same period.
This increase in R&D investment comes as a positive sign following a 5-year period characterized by a slump in innovation. During the slump, R&D investment in the industry declined by 16.2%. This trend has occurred in response to the evolving technological landscape and shifting consumer expectations, especially toward sustainable solutions.
Many popular companies have introduced innovative solutions through R&D efforts. For instance, Berry Global recently launched a new version of its Omni Xtra polyethylene (PE) cling film, specifically designed for fresh food applications. This innovative film serves as an alternative to traditional polyvinyl chloride (PVC) cling films and builds upon the success of the existing Omni Xtra film used in packaging various food products.
With this context in mind, let’s take a look at some of the best plastics and rubber stocks attracting investment currently.
Our Methodology
For this article, we conducted an analysis of our database of 919 hedge funds as of Q1 2024. From this dataset, we selected the best plastics and rubber stocks based on the hedge fund sentiment. The top plastics and rubber stocks have been ranked in ascending order of the number of hedge funds holding a stake in them as of the first quarter of the year. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of factory workers packaging items in a modern factory.
Berry Global Group Inc. (NYSE:BERY)
Number of Hedge Fund Holders: 43
Berry Global Group Inc. (NYSE:BERY) is a leading manufacturer and supplier of a wide variety of plastic products used across numerous consumer and industrial applications. Its extensive portfolio includes rigid packaging solutions, nonwoven materials, and healthcare and hygiene products. Berry Global Group Inc. (NYSE:BERY) operates across the globe, serving customers in North America, Europe, Asia, and South America.
Berry Global Group Inc.’s (NYSE:BERY) Q2 2024 financial results met expectations. The company managed to work around extended weak macroeconomic demand and continued inflation in key raw materials at the start of fiscal 2024.
During the quarter, Berry Global Group Inc. (NYSE:BERY) also bought back 1.4 million shares amounting to $81 million. The company retained authorization to repurchase $354 million worth of shares by the end of the quarter.
Furthermore, Berry Global Group Inc. (NYSE:BERY) implemented structural improvements across its operations. The company raised its original cost savings target from $140 million to $165 million. The management anticipates a $55 million contribution from the program during this year and another $25 million in the next year.
Analysts are showing interest in the stock with a leaning toward a “Buy,” rating. The average price target of $72.8 reflects a potential upside of over 20% from the current price levels.
Here’s what Blue Tower Asset Management said about Berry Global Inc. (NYSE:BERY) in its Q1 2024 investor letter:
“On the other extreme are the “boring” companies. These companies are boring not because their products or services are necessarily boring. Rather, this refers to them being a stable, defensible company with limited potential upside. On average, these companies tend to be undervalued and give superior returns when compared with “lottery ticket” stocks. Companies that produce consumer staples that are insensitive to the market cycle are an example of these boring, low volatility companies. Low volatility stock returns tend to be higher than high volatility stock returns even though we would expect the opposite from the efficient market hypothesis6. An example of a company that fits this model from our portfolio is the plastics manufacturer, Berry Global Group, Inc. (NYSE:BERY). Berry is the low-cost producer of plastic packaging in the United States. As the dominant, mature company in a slow-growth industry, there is relatively little chance of a dramatic short-term growth in the company’s stock. However, the company trades at a very cheap valuation and has been steadily profitable and growing over the past decade. With our expectations for its forward rate of return, we believe Berry makes a great contribution to the portfolio even if it may be “boring”.”
Overall BERY ranks 1st on our list of the best plastic and rubber stocks to buy. You can visit 9 Best Plastics and Rubber Stocks to Buy to see the other plastic and rubber stocks that are on hedge funds’ radar. While we acknowledge the potential of BERY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BERY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.