Norbord Inc. (OSB-N)

(A Top Pick Nov 5/15. Up 23.8%.) This was a play on US housing, OSB prices going higher, adjusting their Ainsworth earnings and a lower Cdn$. He still sees 18% EPS growth compounded annually over the next couple of years. This is a better place to be then with pure lumber players due to the trade dispute uncertainty. Thinks this is going to $38.

A play on housing, which is showing signs of revival. It got beaten up pretty badly. Prices are up nicely in North America and are bottoming in Europe, where 30% of their revenue comes from. The stock is cheap.

OSB inventories are said to be at rock bottom levels. This is a concentrated play on US housing. They have merger synergies left with Ainsworth . They realized $20 million and there is a $45 million target. There is not a lot of growth out there and he is looking for names that can benefit from everything. The fact that this company sells into the US really helps. Dividend yield of 1.48%.

This will depend on US housing and commodity prices. The US housing has improved recently. They need 1.25-1.5 million housing starts to really get the OSB market going. Dividend yield of 4%.

With the slowdown in US housing, this collapsed. It has oriented strand board production facilities in Canada, the US and Europe. He liked the way the company operated, and then the bottom fell out and it has been struggling ever since. The big thing they need is to see a turnaround in new start housing in the US. There have been some very good numbers, so he is tempted. Very well-run company and they produce a good product, but you need a very strong new housing market. He has been waiting for this to happen for months now.

Seasonality on this is similar to most lumber stocks in Canada. Historically it is from October right through until April of each year. Last year it peaked out a little bit early, and did it again this year. Stock is now establishing a downward trend, trading below its 20 day moving average and is underperforming the market.

Cut their dividend down to about 4%. Acquiring Ainsworth Lumber (ANS-T), which will be accretive for them. This is a play on the eventual US housing recovery. OSB prices have stayed really, really low at around $200. Eventually that has to turn up to justify the stock move that this company has had. He would consider Selling a Covered Call on this.

Any time you are getting a 10% dividend, you have to ask why. This company is not earning the dividend. This stock is not behaving at all. Forest stocks in general are behaving pretty well, so he would prefer to focus on lumber.

Doesn't follow this. 2 things are happening to the housing market, which is a plus for them. Freddie Mack and Fannie Mae are loosening restrictions, so you are going to see additional money being available to mortgage borrowers. Secondly, rates seem to staying static for the next little while, which will be seen as a plus by buyers. If West Fraser (WFT-T) and Canfor (CFP-T) benefit, then this one can too. He prefers to play US housing through Canfor.

(Market Call Minute) Prefers Lumber stocks.

The latest US data for housing has been a little bit more positive. OSB prices are off the bottom. Housing starts were down by about 14%. Company has been executing well. Q2 beat on better pricing and shipments were up 10%. There is definitely pent up housing demand in the US and there is better employment. Company is only committed to keeping their dividend to the end of their fiscal 2014.

(Market Call Minute) Had pretty good production in North America and Europe, but housing starts are still not at their average.

This produces oriented strand board. They have plants all over the southern US, Canada and in Europe. Recently started paying a dividend and the yield is extraordinary at around 11%. What the market is telling you is that the dividend is not safe, so you have to make a calculation whether you hold it for the dividend, and if it is cut how much downside there is going to be. With US housing quieting down, the market is sending you a signal that there are some problems here.