Clearwater Paper Faces Challenges in Weak Paperboard Market

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Longleaf Partners Small-Cap Fund's fourth-quarter 2025 investor letter discussed its investment in Clearwater Paper Corporation (NYSE:CLW), a leading manufacturer and supplier of bleached paperboard packaging products. The fund noted that Clearwater Paper was a detractor for the year as the already weak solid bleached sulfate (SBS) paperboard market showed few signs of improving, with oversupply issues exacerbated by a competitor conversion earlier in the year. However, the fund believes the clearest way the oversupply problem will be fixed is through capacity closures, and help is also coming in the form of tariffs on competing European capacity and a weaker dollar.

Why it matters

Clearwater Paper's struggles highlight the challenges facing the paperboard packaging industry, which has been impacted by oversupply and weak demand. The fund's perspective on Clearwater Paper's mid-cycle free cash flow potential and management's capital allocation track record suggests there may be opportunity in the stock despite the current headwinds.

The details

Longleaf Partners Small-Cap Fund noted that Clearwater Paper continues to operate well what it can control, as evidenced by meeting synergy targets from a large and opportunistic acquisition completed last year. The fund agrees with Clearwater Paper's decision to focus on share repurchases after running an analysis on a high return but time-consuming project, as the business trades at a low single-digit multiple of growing mid-cycle free cash flow.

• Longleaf Partners Small-Cap Fund bought shares of Clearwater Paper in April.
• Clearwater Paper's stock has since sold off as the already weak SBS paperboard market showed few signs of improving.

What they’re saying