Looking for a solid stock at a reasonable price? Give paper manufacturer WestRock (NYSE: WRK) a look. It does face some uncertainty because of the ongoing global trade war and worries about a recession, but its earnings and operating efficiency have been growing as it integrates a massive acquisition, and demand for paper-based packaging is growing, too.
Paper isn’t the most exciting investment out there, but the rise of online shopping has pushed demand for cardboard boxes to an all-time high, while negative consumer attitudes about single-use plastics and plastic packaging are causing consumer-facing brands to run toward paper-based solutions.
Through the first nine months of fiscal 2019 (the period ended June 30), WestRock reported a 13% increase in revenue and a 31% increase in operating income compared to the year-ago period. Cash from operations jumped 23% in that span, spurring confidence in the long-term sustainability of its dividend, which recently yielded 5%.
WestRock expects its cash flow to keep growing as it reaps the benefits of operating efficiency improvements and organic growth initiatives in the next few years. That includes investments to modernize existing manufacturing facilities and new product launches to better serve the needs of commercial customers. With shares trading near five-year lows, investors with a long-term mindset should take a closer look. (The Motley Fool has recommended WestRock.)
Ask the Fool
Q: Are mutual funds safer than stocks? – A.T., Madison, Indiana
A: They generally are, because investments in mutual funds are spread across many different holdings (such as stocks and/or bonds), reducing the overall level of risk. A single company in which you’re invested could end up going out of business or having its stock fall sharply, but it’s hard to imagine all the holdings in a mutual fund going out of business simultaneously.
Mutual funds can and do see their values drop, though – some funds are more volatile than others. (Some, for example, might hold only energy or financial stocks, while others may hold a wide variety of industries.) Overall, funds managed by active stock-pickers tend to underperform simple, low-fee index funds.
Remember, too, that with individual stocks, if you keep up with your holdings’ financial reports and news coverage, you’ll reduce your chances of being surprised by bad news.
Q: What’s the ideal number of stocks for me to own? – M.H., Panama City, Florida
A: If you’re not willing or equipped to keep up with your holdings, the right number is zero; you’ll be better off in a low-fee stock index fund. Otherwise, between eight and 20 is a reasonable range for most people. T
The more stocks you own, the more work you’ll have to do to keep up with them all. With 50 companies in your portfolio, you’d have 200 quarterly and annual reports to review each year! Meanwhile, owning too few stocks can be risky.
Be sure to focus your money on your best ideas – the companies you believe hold the most promise. Why invest in your 21st- or 37th-best idea?
My dumbest investment
My dumbest investment, I’m sorry to say, was college. I did learn a lot, but my student loan debt makes me regret going. I have more than $100,000 in debt for a bachelor’s degree. – Q.E.
The Fool responds: Ouch. Student loan debt is a massive problem for millions. Still, while many people make a good living without having gone to college, many others don’t. According to one recent study: “The typical college graduate will earn roughly $900,000 more than the typical high school graduate over their working life.” Besides the earning potential, college students end up more educated, and often acquire a large circle of friends, too.
That’s all compelling, but the cost of college is a legitimate problem. Doing a lot of research before even applying can help: Look up lists of the most affordable colleges. Yes, Columbia University in New York charges more than $60,000 for tuition and fees for one year, but the University of Florida charges less than $30,000, and in-state tuition at state schools often costs less than $15,000 annually. Be sure to apply for financial aid – and look up scholarships you might qualify for, as there are gobs of them.
As you’re already saddled with debt, consider living as frugally as possible for a while – perhaps with roommates. Look into consolidating your loans, and see whether any income-based repayment plans are available to you.
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