Packaging and Forest Products

Vertical Research sees two key themes dominating the investment discussion in Packaging and Forest Products over the next one to three years: (1) the secular structural improvement in U.S. containerboard, and (2) relative winners and losers from potential changes in regulations, corporate tax policy, and longer-term interest rates in the US. The virgin fiber-based United States containerboard/box system should benefit from its near-complete vertical integration coupled with a looming tightness in recyclable materials required by overseas producers. We also see the containerboard and wood products names as “relative winners” in an environment of lower corporate tax rates and higher longer-term interest rates induced by accelerated economic growth. On the other hand, we see the rigid/flexible packaging companies as well as the timber REITs as being less positively impacted in such an environment.

Top Picks:

  • International Paper Co (IP)
  • Domtar Corp (UFS)