Norbord Inc. (OSB)

He still holds a lot of a US homebuilder ETF. But he is not crazy about this company.

Oriented strand board (OSB), their core product, has come under severe pricing pressure. Also, the dividend yield is quite high and seems unsustainable, so he expects to see this cut sometime in the next year.

Great Short? If you Short here, you are going to have to pay that -10% dividend that the stock is paying. They just came out in Q2 and said that the dividend is safe, at least until the end of 2014. The housing data in the US was a big surprise. OSB pricing is exceptionally weak, however the company is executing. Better pricing and their shipments are up 10%, year-over-year. There is a lot of talk right now that the housing recovery doesn’t happen, and he thinks that pent-up demand will eventually turn housing around.

Their 12 months earnings forecast going out was $2.15 and the dividend is $2.40, so coverage is sketchy. They need a great big increase in the earnings outlook in order to get going again. However, his Fair Market Value calculation is pretty good, even based on those rather depressing earnings. He had a target of $32 and even higher. There is a good possibility, if those earnings get some momentum behind them, you’ll get back up to the $32-$33 area, about 4X Book. This is typically where this company has peaked in the past.

Housing. Exposure to US housing as well as Europe and Canada. 8% dividend. Pulled back with the forestry sector. The dividend is high so you are weary that the market is saying it could get cut. She is positive on US housing in which case their stock price should go up. Prefers CFP-T, however.

Building materials. Trading very much off the US and the perception of the market lust (?). When people start reopening plants for the oriented strand board, there is a risk the market gets flooded, which can be very volatile. This is probably why this is weak. Everyone is expecting the housing market to slow. The stock is near its 52-week low. 5 year chart shows it has broken out. Currently its risk/reward is not too bad at this point. Good dividend.

This is in a downward channel. If you are a short-term trader, you could take a chance, but he doesn’t like this industry group. Its current level can be a bit of a support. However, it has to break above its channel.

Has been frustrating. US housing recovery is ticking along. Company is committed to their dividend until the end of the year. This could be a challenging name and they may have to cut their dividend next year. Buy while it is weak.

All the lumber names have had a pullback because of weaker US housing. Earnings are very cyclical. Generally speaking, she is positive on the housing market, particularly in the US. With the pullback, this is starting to represent an attractive entry point. The group as a whole is starting to look more interesting. She prefers Canfor (CFP-T).

In the construction process of housing, the 1^st thing is lumber usage for the frames and then, when you put on the roof and the walls, oriented strand board comes into play. What bothers him is the variability of the dividend. US housing is flagging of late. Multi-unit demand starts picked up in the latest month, but there is still an overhang so he would be inclined to stay out for the moment.

Doesn’t like the variability in the dividend. Later this year the housing market should pick up again.

The fortunes of this company really come down to OSB prices which have been falling for about a year. The reply response from producers has been big. Supplies are up 12% year-over-year. Sees housing starts for 2014 and 2015 up 20%. If so, housing demand should eventually outstrip OSB supplies. Dividend should be fine but if he is wrong about his assumptions, the dividend might be challenged and could be cut. Feels US housing has several good years ahead of it, which will be good for OSB.

This has very strong seasonality. Historically it moves significantly higher from around October each year, right through until around February. Recently this has not been doing that well. It broke a key support level in the last couple of days. This is a concern as it means the stock has now established a downward trend. Also, it is underperforming the Canadian market and is trading below its 20 day moving average.

Oriented strand board producer. Competes with plywood sheeting. Reinstated their dividend and a lot of investors are not quite sure if that is going to stick or not. Production facilities in Canada, US and EU so you have a broad exposure. Stock has not gone up since the last dividend increase so market is not convinced it is secure, nor is he. Not sure they have really turned the corner yet. You could speculate that the dividend is held up and earnings continue to grow. Prefers Canadian Lumber companies like Canfor.

Manufactures oriented strand board (OSB) which is used in housing. Have a number of operations in Canada, US, Ireland and Europe. With a stronger US housing, he thinks there will be 1.1 million housing starts in the US. Feels the dividend is sustainable. We are at the right stage for this type of investment.