One year later, you still can buy assets for 40c on the dollar: Clearwater Paper (CLW)

A year ago I wrote here about buying Clearwater Paper (CLW) [at 40c on the dollar](https://www.reddit.com/r/ValueInvesting/comments/1ngu88c/buying_assets_for_40c_on_the_dollar_clearwater/). Stock was around $21, tangible book around $50/share, and I put 20% of my portfolio into this company.

Then it got worse. The stock got cut in half over the following months and I kept buying the whole way down. In April, after Q1, it dropped another 20% and touched $11.73 intraday, just below the Covid low. I got shares at $11.78, which was honestly pretty satisfying. My cost basis is now $15.52 (slightly off from my article as I bought more yesterday), and CLW is 85% of my portfolio.

While all of this was going down, the industry was already fixing itself, yet the stock kept dumping. The original problem was a competitor adding 500k tons of new SBS capacity into the market, which pushed utilization into the low 80s and killed pricing. By April this year Smurfit WestRock had shut down 130k tons and CLW had pulled another 200k tons. Almost half of the problem gone in a quarter, but Mr. Market didn't wanna see that whatsoever.

Then last week CLW reported Q2 and Mr. Market decided it warranted a +25% move. Finally! RISI printed the first real SBS increase in July, +$40/ton on boxboard and +$60/ton on cupstock, and they are estimating Q2 utilization at 88% and tracking to 90% by year end. CLW is pushing a $60/ton hike from June plus a second $60 from August, and they are sold out for the year. Smurfit reported last week as well, saying that they are also sold out and that they will also be implementing a second hike on top of the one from June that all competitors implemented, which should guarantee that these second hikes actually pass. That would be huge, as $50/ton gives CLW +$60M in EBITDA over 12 months. Once these hikes go through that should be around $140M+ in EBITDA for CLW over a year (we should see this heavily starting Q1/Q2 2027, but we will see improvements every quarter from now on given market mechanics).

Management also did a terrific job with the balance sheet, as insurance recoveries, tax refunds and working capital improvements brought cash and equivalents to around $90M against a historical average of $30M, reducing CLW's net debt by $59M in the last quarter and putting them in a much stronger position to renegotiate their approaching debt maturities. And it's not only us equity investors being optimistic, as the 2028 bonds rallied from 80% of par to 90% of par after these earnings.

The stock is now around $22, a bit above where I offered it to you a year ago, except the oversupply is fixing itself, pricing is actually turning, and the balance sheet is stronger. I haven't sold a share, it's 85% of my portfolio, and I won't sell anything at least until I see $45 (but if the market turns tight this might go significantly higher).

You can read more about the Q2 breakdown and the rest of my portfolio in my latest article:

[https://open.substack.com/pub/alessandrovittoria/p/54-ytd-clw-updates-and-a-look-at](https://open.substack.com/pub/alessandrovittoria/p/54-ytd-clw-updates-and-a-look-at)