Investing in Plastics Stocks

Plastics are ubiquitous. From packaging to household goods to building materials to automotive components, there are seemingly no limits to where plastics are found in our day-to-day lives.

With so much demand, there is a large number of public companies focused on plastics from which investors can choose. It’s a massive market opportunity: Global total plastic sales were estimated at $580 billion in 2020, and the market is forecast to grow at a compound annualized rate of 3.4% through 2028.

Investors can select from companies that make the raw ingredients that go into plastics, companies that make the end products we use as consumers, and a few that do a bit of both. Here’s a look at some of the top names in plastics for investors to consider.

Top plastics stocks

Data source: Yahoo! Finance. Data as of Sept. 28, 2021.

1. Exxon Mobil

ExxonMobil is best known as an oil and gas company, but it is also a major producer of specialized polypropylene, a raw material that goes into plastics. Propylene is a molecule that is produced as part of the oil-refining process, making this a natural offshoot of Exxon’s core business.

Exxon significantly boosted its production of polypropylene in 2020 in response to the need for more masks and medical supplies to support the COVID-19 pandemic response.

This company is very much entrenched in the fossil fuel energy economy, but plastics offers some amount of diversification from Exxon’s core petroleum offerings.

2. Dow

Today’s Dow is the product of a megamerger between DuPont (DD 0.22%) and legacy Dow Chemical that resulted in the two companies combining similar businesses and then splitting off into three more focused companies. While DuPont still has some plastic operations, Dow is the pick for this list.

Dow makes a range of plastics, adhesives, sealants, and additives used in building, automotive, personal care, packaging, and industrial end markets. Investors get this plastics business housed within a massive and diversified materials sciences portfolio that generated $39 billion in net sales in 2020.

3. LyondellBasell Industries

Lyondell is a Dutch multinational chemicals company that ranks as the largest licensor of technologies to produce not just polypropylene but also polyethylene, two of the basic building blocks that go into making plastic goods.

LyondellBasell is a cash generation machine and has a history of returning that cash to shareholders through dividends. The company can get caught up in cyclical demand for chemicals, which tends to ebb during periods of economic uncertainty. Still, this is a diversified business that should be able to grow with increasing global demand and provide a steady source of income for your portfolio.

4. Amcor

Amcor is a global manufacturer of packaging for food, beverage, pharmaceutical, medical, and personal care products. The company generated $12.5 billion in sales in 2020 from 230 production sites in 40 countries.

Amcor, formed in the 1860s as Australian Paper Manufacturers, has continuously evolved over the years. It sold its paper goods operations in 2000 and followed that with a series of deals culminating in its $7 billion purchase of Bemis in 2019 to establish itself as a global leader in packaging. Amcor today trades both on the New York and Australian stock exchanges.

5. Berry Global

Berry is another packaging products manufacturer, reporting $11.7 billion in annualized revenue through the most recent quarter and operating from 295 facilities in 39 countries. Home and health and food and beverage each account for about one-third of total revenue, with more than half of sales coming from North America and another 33% from Western Europe.

Berry has been an active consolidator over the years and has managed to grow without eating into results. Revenue has increased at a compound annualized rate of 14% over the past five years, while free cash flow has grown at a 21% annualized rate and operating EBITDA at 16%.

6. AptarGroup

AptarGroup has a range of businesses supplying packaging for the pharmaceutical, household, industrial, and food markets, but it is best known for its fragrance, cosmetics, and personal care products and its lineup of patent-protected specialty pumps, valves, and dispensing closures those sectors require. The company has about $3 billion in annualized sales and has forecasted revenue growth of 4% to 7% through 2025.

Aptar has a global presence, generating about half of its revenue in Europe and 33% in North America. The company has completed nearly two dozen acquisitions, investments, and partnerships since 2016 to expand its reach and broaden its portfolio.

7. Trinseo

Trinseo was spun out of Dow Chemical in 2009 before Dow’s rebirth via the DuPont megamerger. The company’s plastic, latex, and synthetic rubber products are used mostly in industrial applications, including automobiles, appliances, consumer goods, medical supplies, and construction.

Trinseo was private equity-owned until 2014, and the company still flies largely under the radar compared to some of its larger plastics peers. But in a world where industrial products manufacturers are increasingly demanding sturdy but lightweight components, many of Trinseo’s plastics should see strong growth in the years to come.

Are plastic stocks right for you?

Plastics are the target of criticism from environmentalists due to concerns about the fossil fuel-intensive production process and the long time it takes for plastics to degrade, but, for many applications, there are no good alternatives. All of the companies on this list are exploring how to manufacture plastics from more environmentally friendly sources and create products that degrade faster when possible. Despite the concerns, plastic demand should continue to grow for the foreseeable future.

Plastics aren’t likely to match other stock sectors such as tech in terms of massive growth potential, but these companies should be reliable performers selling into stable and growing markets that can provide ballast in a tech-heavy portfolio.