Avery Dennison vs Asia File

[i4value]

Ever since coming across an article suggesting that the packaging sector would benefit from the growth of online retailing, I have been hunting for packing companies. My search went beyond Bursa and included US.

Why the US? In 2023, the total return (dividend + capital gain) for the Bursa KLCI was about 3%. The S&P 500 achieved 26%. Even accounting for forex losses, you can see why the US is better. But this does not mean buying blindly. You still need to do fundamental analysis. Take the example of Avery.



This is NYSE a global materials science and digital identification solutions company. Despite its acquisitions, its revenue only grew at 4.4% CAGR over the past 10 years. While ROE and net margins have been trending up, there were no improvements in other operating parameters,  I think that the stock is fully priced.

On the other hand, Bursa Asia File has diversified into food packaging. Not exactly sexy, but it has a margin of safety. The only concern is how long it will take for the market to re-rate. If I can find an equivalent US packaging company, that would be priority. In the absence, Asia File is there.

[i4value]

I differentiate between a good company and a good investment. A good company is one that is fundamentally sound. A good investment is one that can enable you to make money.

A sound company may not be a good investment if it is overpriced. A good example of this is NYSE Avery Dennison.

I rated it as fundamentally strong based on a number of criteria – eg 5% organic growth, improving net margin, ROE trending up, and good capital allocation.

But my valuation showed that there is no margin of safety. If you want more info, refer to page 21 of INVEST.