I am continuing my series of articles looking at stocks that are more “recession-resistant” in order to build up the defensive side of my portfolio. Sealed Air (SEE) came in one of my screens, and I wanted to do some due diligence. I believe the company is a high-quality, safe business that should be considered when talking about long-term investments.
Just a brief background on the company, Sealed Air is a packaging company focused on food (including raw foods) and other products. The company was actually the pioneer of Bubble Wrap, which is one of its main brands alongside namesake Sealed Air, Cyrovac, and Autobag. Bubble Wrap is that plastic with little air pockets used for packaging, and the company has continued to create innovative products along this vein.
The company operates two main segments, namely the Food segment and the Protective segment. The Food segment focuses on packaging materials and equipment to properly “seal” and package raw food products (e.g., that cut of steak at the grocery store). Proper packaging enhances food safety and extends shelf life. In 2019, the Food segment made up approximately 60% of total revenue. The Protective segment creates those plastic packaging with air in them that are designed to protect valuable goods while in transit. You may have seen them when you opened your Amazon (AMZN) package. This segment benefits from the current e-commerce trends, as more products are being shipped directly to consumers, thus increasing the need for protective packaging. In 2019, this segment represented 40% of total revenues. In each segment, the company competes against other manufacturers that create similar products or packaging made with other types of material (like foam, paper, plastic, etc.)
The company’s long-term competitive advantage lies with the scale of its operations and its continued innovation. Sealed Air