It Was the Best of Times, It Was the Worst of Times
The financial world is very anxious right now because the news has been so good. The U.S. economy is a year short of a record ten-year expansion. Jobless claims are at 49-year lows, hourly earnings increased at their fastest annual pace in eight years, consumer sentiment is at all-time highs, manufacturing expanded at the fastest rate in 13 years.
However, there is a dark side. The Federal Reserve is charged with keeping both unemployment and inflation low. With a mature expansion and stock markets that have roared since the presidential election, the Fed’s tone has been increasingly hawkish. The market has also become worried about the cost and scarcity of manufacturing inputs, including labor. The cherry on top came today with President Trump announcing that he will set new across-the-board tariffs on steel and aluminum; spooking investors with the specter of a trade war.
As investors look at where to put their money in a market like this, they tend to start thinking of “boring.” Not the Elon Musk kind, but no-nonsense industries that are the backbone of the economy. Packaging companies, while still affected by market cycles, are always in demand. Their customer segments can be broadly broken up into consumer, industrial, and hygienic. Industry research firm Smithers Pira expects consumer packaging services to grow at 9.5% a year through 2022. They also peg growth of the industrial packaging segment at 3.2%, and hygienic applications at 3.9%.
In these interesting times, investors should be focused on companies that aren’t locked into any particular niche. Berry Global Group Inc (NYSE: BERY) spreads is sales fairly evenly across all three segments, and through consolidation, has become the number one or two player in the majority of its markets.