Western Forest Products Inc. (WEF.TO)

He is completely out of all of the forestry stocks right now, but this is one he has owned in the past. They have a great little business operating out of British Columbia. Have a real specialty in some of the logs that they sell as well as some of the finished products. The lower Cdn$ will certainly help earnings, but at the same time he has seen lumber prices declining. If he were to see lumber prices steady and any kind of housing increase in the US, there is a possibility there would be a ramp up in earnings.

At these levels it is pretty attractive. They benefit from the lower Cdn$. After going through a tough cycle for the forest products, things are really shaping up now.

He did extremely well in the space in 2010-2012 and then pared back. The housing market is well along in the cycle and Canadian companies may be facing anti-dumping tariffs in the US. He thinks the cycle has played out.

Will probably live and die with the US housing cycle. Housing starts for January were re-stated higher. Housing starts are at pretty good levels. Their costs are in Canadian dollars and they sell the product in US dollars. It is not a bad idea to go back into this sector.

It is very much China / Far East oriented. It ought to be better. Lumber prices are quite low right now.

The stock is cheap based on current earnings forecasts. When you get to a valuation peak in these things they tend to look the cheapest. When they get to their lows their earnings vanish and they look ridiculously overpriced. Right now they look ridiculously cheap. We are getting a very mixed message about US housing. He hopes there is a part two to the bull market.

Missed a quarter recently, and the stock pulled back, but pulled back significantly. The group also pulled back. All of a sudden there is some doubt of the veracity of US housing keeping going. China is slowing, so there is a little bit of that built-in. Under $2 is a Buy story, but you have to believe that US housing is going to come back over the next couple of years. This gives you a nice dividend.

This was for US housing, which was looking very good in the last 2-3 years. However, we have started to see the number of housing starts starting to fall off. The squeeze on real income in the US remains. If there is any increase in mortgage rates, there could actually be a pullback in housing starts.

A 3 year chart shows some support at around $2. You want to see this make a successful test by bouncing off $1.90-$2, which is its support. This may be an OK buy. You have resistance at around $2.80.

They are down because they disappointed the market. Log sales are down as they compete with Russia and ship less to China. He would prefer US home builders to leverage on the US home recovery.

Has now pulled back to $2.25, which is around the area where he sold his holdings. Lumber is priced in US$. They sell a lot into the Japanese markets, and with pricing where it is and with the Japanese economy, this has been a natural pullback. They will participate in US housing to some extent. He is not tempted to go back into this at this time.

(A Top Pick Jan 6/15. Down 10.57%.) Forest companies were really hit hard over the last couple of weeks. Thinks forest stocks are a global thing. Trees are wanted all over the world. This current down is probably a buying opportunity. The trend is still higher, so you want to acquire at these lower prices.

Earnings just came out and were disappointing. The US housing side hasn’t really taken off the way he would have thought it would. There are some really interesting structural psychological aspects to this, and it shows. When there is a housing collapse, young people tend to rent rather than buy, even though they can afford it. Housing starts are still not even close to what would have been expected. Dividend is safe.

Lumber prices had been a little soft in the last couple of weeks because of a bit of worry on US housing. Feels the group is a huge beneficiary of a weaker Cdn$, and that US housing is going to be fine. Despite a two-week drop in spot lumber, it will come back later in the year.

Recently added this to his fund. Has tremendous exposure to the increase in housing construction in the US. Also, they were not as impacted by the pine beetle scourge. Trading at about 6-8X PE. Has a pretty good outlook this year.