The paper and forestry products industry is a mix of varied industries with specific end markets rather than one single market. As such, investors can gain exposure to a wide range of investment themes.
For example, there's a growth opportunity in transport packaging driven by surging e-commerce demand. Meanwhile, demand for consumer packaging and tissue offers investors a solid and stable way to get exposure to global economic growth. Despite the decline in graphic paper (newsprint and writing paper) and other areas, the overall industry is still growing. So, let's look at the top paper stocks and what makes them attractive for investors.
Leading paper companies
The leading paper companies to invest in
The following table outlines a few of the leading paper and lumber stocks you can buy stock in.
| Company | Ticker | Market Cap | Description |
|---|---|---|---|
| International Paper | (NYSE:IP) | $15.6 billion | Containerboard, fluff, market, and specialty pulp. |
| Suzano | (NYSE:SUZ) | $12.3 billion | Major hardwood pulp (eucalyptus) and paper producer in Brazil. |
| Clearwater Paper Corporation | (NYSE:CLW) | $585.6 million | Private-label tissue products and paperboard for packaging. |
| Mercer International | (NASDAQ:MERC) | $439.2 million | Market pulp and wood products. |
International Paper
International Paper
Following the spinoff of its printing papers segment (uncoated papers used in copiers, desktop printers, and digital imaging) into a new company, Sylvamo (SLVM 1.9%), International Paper is now focused on two core businesses.
The industrial packaging segment (around 82% of revenue) manufactures linerboard, with 59% of its sales volumes going towards corrugated boxes, and 16% towards containerboard.
The global cellulose fibers segment (around 18% of revenue) produces fluff, market, and specialty pulp. As the name suggests, fluff pulp is used to make baby diapers, feminine care, and other personal care products. Market pulp goes into paper and tissue products, and specialty pulp goes into a range of end markets such as textiles, construction, and paints.
International Paper is now a company focused on corrugated packaging, mainly used in food and consumer goods packaging and the higher-growth market of e-commerce shipping.
Suzano
Suzano
This Brazilian pulp and paper company produces eucalyptus hardwood pulp for its paper products and sells pulp to other paper manufacturers. Hardwood pulp tends to have shorter fibers, making it suitable for printing and writing paper, tissue paper, and specialty paper.
Suzano is responsible for 40% of the printing and writing paper produced in Brazil and 25% of the paperboard. While Suzano's end markets, notably printing and writing paper, may not be the most attractive in the industry, they are still growing.
The company's management believes that eucalyptus pulp is growing as a share of hardwood pulp worldwide, so the long-term case for the stock rests on the cost-effectiveness of producing eucalyptus pulp in Brazil, which has a shorter growth cycle and a higher yield than other hardwood trees. According to Suzano's SEC filings, "Brazil has the fastest tree growth rates in the world and the highest productivity rate. Thus, we believe that we are among Brazilian pulp producers that have the lowest production cost in the global market."
Clearwater Paper Corporation
Clearwater Paper Corporation
The company operates two segments: pulp and paperboard and consumer products, which produce and sell private-label tissue to large national retailers. Its long-term growth depends mainly on benefiting from the trend of private labels increasing market share as compared to branded products.
The pulp and paperboard segment produces bleached paperboards used in the high-end segment of the packaging industry. Meanwhile, the consumer products segment makes and sells a line of home tissue products. The revenue split was roughly even between the two segments in 2023.
As of July 2024, management has a deal in place to sell its consumer products business, with the deal expected to close in late 2024. The deal signals management's intent to focus on being a supplier of paperboard to North American converters.
Mercer International
Mercer International
Mercer International also operates two segments: pulp and solid wood. Starting with pulp, Mercer is the second-largest producer of northern bleached softwood kraft (NBSK, the industry's pulp benchmark) in the world and the only significant pulp producer in Germany. It has two pulp mills in Germany and two in Canada.
In contrast with Suzano's hardwood, softwood pulp tends to have long fibers and is used in products that need greater strength, such as newsprint, paperboard, catalogs, and lightweight coated paper.
With pulp mills in Canada and Germany and with 88% of its pulp sales made globally, Mercer truly is international.
The solid wood products segment manufactures and sells lumber and manufactured products, with its primary end markets in the U.S. and Germany.
The company offers investors a relatively safe way to play the cyclicality of the pulp market. As with all commodities and material stocks, pricing depends on the intersection of supply and demand.
Related investing topics
Investing in paper stocks
Investing in paper stocks
As this short introduction has outlined, the industry is a mix of various end markets. Some products, such as cigarette paper, newsprint, and writing paper, are in decline. Others, like corrugated boxes for e-commerce packaging, are in growth mode. Still others, such as tissue and packaging in general, are markets growing in line with the economy.
Many of the stocks in the industry trade on very low valuations that reflect the mature and low-growth nature of the industry. The sector should attract value investors looking for hidden gems in the bargain basement of the investment world.
