Western Forest Products Inc. (WEF.TO)

Brookfield wants to sell down their stake but will wait for the opportunity. It could put a cap on the stock price.

Comparing this against the Canadian bellwether, West Fraser Timber (WFT-T) it has substantially outperformed that. However, the spread is narrowing so we are getting into a period now where he expects early relative underperformance. He’d be careful. Also, he doesn’t like the pattern. If you own and have profits, he would take the profits.

The big gains have been made on this stock. If you have an interest in the forest sector, you can continue to hold.

A well managed company. Balance sheet is great and revenues have been going up. Limited debt, under $100 million. Stock price has gone up quite a bit, but it is far less than it used to be. Thinks it could continue to do well. The forestry sector has had a wonderful recovery. You always have to watch the US and what the politicians there might want to do. You also have to watch housing in the US, which might be cooling a little bit. There is a big backlog of lumber in China right now, which might put a bit of a cap on sales. Instituted a dividend in the past year. When companies do this, they generally do quite a bit better over the next 2-3 years than the stock market as a whole. 3.5% yield.

Brookfield people have been gradually exiting which is a positive, because eventually this will be held in the market with the possibility of someone bigger tucking it under. Every time they want to sell a chunk, it knocks the price down. Some of the negative has been the weather and the slowing of the housing market. Expects there will be very strong sales of their products in the next couple of quarters. Wait for a big down day and then load up on it.

Canadian Forestry Producers. This is a growth and a value play. It is still a very cheap stock if you believe in a US housing recovery, which he does. Is being held back by Brookfield exiting their position. WEF is putting cost control in place.

It is a valuation call here. It is 7 times earnings. He does not think the housing sector is collapsing, but rather pausing. 3.4% dividend. Brookfield has been selling their holdings, but they don’t sell it without a premium.

Just recently sold because of technical reasons. It the price improved he would look at re-entering, perhaps $2.50-$2.60. If housing continues to recover then this one will do well.

Had been Long on this kind of company 2011-2013 based on the US housing recovery and the rapid rise in housing starts there. That has really cooled off as well as demand in China. Feels the bubble is on the verge of popping. This is a sector to avoid. Believes he has a Short position in this.

This was $1.40 back in October and nearly doubled in a matter of a few months. The current pullback is not unusual. Pullbacks are usually a third to a half and this is very close to that level. This doesn’t look like the downturn has ended yet. We are right at the 100 day moving average level. He thinks on this retracement it will go back down to $2. Keep your Stop level at around $2.15.

Technically the upward trend is still established. Starting to show some form of resistance right at the time when you expect the seasonality to reach an end. Any kind of weakness below its short-term support level of around $2.30 would be a clear sign that you should be getting out of the security.

Had a great run. Has pulled back a bit but their earnings were strong. The forestry sector is a good place to be. Brookfield is gradually exiting this company and every time they put up another 40 million shares, it tends to knock the price down. Thinks one of the larger forest companies will scoop them up. $3 is not an unreasonable number for this company.

Seasonally weak period around now for these stocks. You could revisit it in the fall. Well managed and good asset and will participate in the improving US housing market. He would look at getting back in if it was much cheaper.

Would not chase it up here. They are well positioned and have some very valuable non-core assets. You might get a significant bump if they sold it.

If the stock is going up like this one, he can’t tell you when it will turn down. It is the end of the seasonal period through the end of March. Use a trailing stop. Maybe it keeps going into May. Maybe sell a quarter or half right now.