James TelfserInterfor CorpIFP.TOBUYAug 27, 2013

He started nibbling at the sector 6-8 months ago, feeling that there was some value building. Will probably take a while for these stocks to turn. Accumulate on weakness.

Not a fan. Companies in the sector are low-quality businesses, price takers. Political relief from tariffs may give some relief in the short term. But ultimately, not a great business. Lots of debt.

Look at something like SJ, which makes residential products, rail ties, and telephone poles. A better compounder, with higher ROIC over time.

This downturn presents great, longer-term opportunities. The post-Covid era saw a building boom and these stocks ramped up. Now, the news is negative, so this looks interesting. Can't say if this is bottoming, though. It's on his radar and will nibble on it.

Example of a stock that's a really tough call right now, simply because current business outlook is so absolutely miserable. But this is actually when he starts to get interested in companies -- when you have the worst-case situation.

He recently started buying. A lot of its lumber is domiciled in the US, so it's not as negatively impacted by tariffs. Federal government may have to provide financial support to the sector, same as they did for Algoma. These ridiculous trade issues need to be settled.

Quality work. One of the largest lumber producers in the world. Not concerned about the stock, but housing markets in both Canada and US are having stability issues. Very tied to homebuilding, so demand can really swing on mortgage rates and affordability.

Strong footprint in Canada and US gives it flexibility to shift production. Likes housing needs long term. Short term, lumber cycle still finding a footing.

Sector is dreadful. Lumber stocks have never been a good buy-and-hold investment throughout his career of almost 3 decades now. If you want to own a lumber stock it's a trade, and you have to get the timing right. Trade and tariff wars don't look to be dissipating anytime soon. Sell. 

The lumber industry in Canada has been in the line of sight for tariffs for the past decade. Housing prices have depressed the price of lumber for the past 2 to 3 years. One he likes in this sector is Doman Building Materials which is more of a processor of lumber. It has a good yield and offers stability.

It is a pure play lumber producer. Forest stocks are down because the housing market in the U.S. is quite weak. 50% of the lumber they manufacture and sell is in the U.S. Watch for interest rates in the U.S. coming down which would be good for housing. If you own it, hold at least some of your shares, maybe all of them.

It has a higher level of production in the U.S. so would be less affected by tariffs than other Canadian lumber companies. The U.S. needs Canadian lumber and one quarter of production from B.C. goes to the U.S., -  but lumber is still needed for B.C.

BC softwood has always been a target of tariffs. This group has been expanding operation in the US to lessen the impact. IFP has the highest percentage of production in the US. Contrary to Trump, Americans indeed need Canadian lumber -- 23% of it comes from B.C. Tariffs will make lumber more expensive to Americans, though American lumber companies will make more money.

Whole sector can be volatile. Nice run since July, when homebuilders picked up substantially. Getting above $19 was significant. Big spike today. Don't want to see it break below $15. Will have trouble between $22-25, so might spend some time there chewing through the supply (as people get out to get their money back).

Homebuilding stocks in the US have been going straight up, but Canadian forestry stocks have been going the other way. WFG has done the best in holding its share price.

IFP and CFP have really started to bottom on the charts. He hasn't done enough digging to know who has a better earnings profile. But looking at the charts, one of these might be a good bet to catch up to WFG and to the US homebuilders. Lower interest rates will have an impact as well.

TOL is one of the biggest homebuilders in the US, and a leading indicator. When it starts to go, as it has in the last few days, it's usually good for the lumber stocks.

Wood products sector doing well, but IFP not performing. Better names in the sector to own. Would not recommend buying. 

Demand for lumber will continue to increase.
Short term weakness in housing (recession) not a concern for long term investors.
Expecting performance for long term investors.