Interfor Corp (IFP.TO)

The analysts had this one wrong in terms of lumber pricing. Offshore sales hurt the prices and the stock came down a long way. He jumped in a week ago due to the low Canadian dollar and the strengthening US housing market. He likes the story in here after the stock dropped 50%.

He thinks it is a best in class lumber play. Look at the decline in the lumber price. It got lower with the commodity decline and that is caused by China. There are good numbers out of the home builders in the US. With prices here this company loses money. He is going to hold it because he thinks we will bounce off these lows. He thinks it will rebound. It is a good time to dip your toe into these names and then watch the Chinese numbers. If they get worse then get out.

US housing is doing fairly well, and this group is probably a Buy. Lumber prices have been lagging a little bit here. It is the seasonally weak period that has just passed. He is hoping for a better 3^rd quarter. Would prefer Western Forest Products (WEF-T) a little better, which pays a 4% yield, so you get paid to wait.

Thinks the long-term for this company is good. The sector has held together surprisingly well. Most people believe the housing industry is on the long steady improvement. Thinks it has also diversified into the US. Very good company.

Forest Products. This is a sector with largely Cdn$ costs, with operations in many cases in British Columbia. They are selling lumber into the US housing market in US$’s, so they benefit from the currency mismatch. A company like this would be a beneficiary.

Good Canadian forest product company. Primarily in lumber and would be one of the forest product companies that he quite likes. Had a pretty good run over the last 3-4 years, but a bit of a correction recently which is a buying opportunity. The US housing continues to levitate out of the decade low that hit in 2009-2010.

It rebounded. Price momentum is not great and valuation is middle of the pack. It is a small short for him.

Interfor (IFP-T) or Western Forest Products (WEF-T)? He doesn’t really like either of these right now. They are both currently in downward trends. The price of lumber for the last month or so has virtually collapsed, and that is starting to have a direct impact on the lumber stocks. Lumber stocks have very strong seasonal strengths in both directions. They tend to be strong in October right through until March/April, and then from April to October they go down. Better opportunities elsewhere.

His favourite lumber company. The fastest growing lumber company in North America, maybe globally. Have been very acquisitive. Transformed from being a largely Canadian-based lumber company to a North American company. Operating in the US, they have much lower labour costs and access to cheaper logs.

She has been on the lumber and the US housing trade for about 2 years now. This year has been rough as prices are down about 25% and the names have all taken a hit. She is seeing some green shoots. Lumber prices are down because there has been a high build-up of inventory in Asia, China and Japan mainly. That is starting to turn. Their inventories are starting to be depleted and she is seeing pricing increases on lumber in the US and Canada. We are also heading into Q2 which is the building season.

He sold part when it peaked a few months ago. He still thinks the US housing market is in its infancy. Forest products peak in the May/June timeframe, normally. The best balance sheet in the industry. They benefited from the Canadian dollar coming down.

Housing starts are down today in Canada. Over 60% of their lumber is manufactured in the US. It has grown rapidly. They probably have the most room for improvement of all the forest companies. There is probably several years of growth in the US housing industry at a slow, steady rate.

He doesn’t own forest product companies because of no or low yield. Stocks have done well based on what is happening in the US on the housing side. Also there are some exports to Asia. This is not a sector that he is interested in.

Homebuilders tend to do well from about October all the way through to the present. If you own, start taking your profits. This one has had a great run, but the period of seasonal strength is now arguably at an end. The trend on this still appears to be positive, but from a seasonal perspective these things tend to underperform going forward.

Forest products and this company are good choices. An extremely valuable company. Big beneficiary of a weaker loonie, Japan and China’s interest in wooden houses, as well as the American interests.