The Canadian forestry stocks we’ve dug up are expected to continue their current stock-price run
SmallCapPower | August 21, 2020: Lumber and OSB (Oriented Strand Board) prices have surged to record levels due to factors such as record repair and remodel demand, a rebound in new residential construction markets, and limited supplies due COVID-19 related staffing problems. At least one analyst, Paul Quinn of RBC Dominion Securities, expects record lumber prices to drive increased profitability for forestry stocks. Today we have cut through and found three Canadian forestry stocks that should benefit most from these boom times for wood.
*Returns are based on closing stock prices as of August 20, 2020
Resolute Forest Products Inc. (TSX:RFP) – $5.86
Resolute Forest Products provides a diverse range of products, including market pulp, tissue, wood products, newsprint and specialty papers, which are marketed in about 70 countries. The Company owns or operates some 40 facilities, as well as power generation assets, in the United States and Canada. RBC Dominion Securities analyst Paul Quinn recently raised his target price on Resolute shares to US$5.50 from US$4, saying record lumber prices “should result in very strong results for Resolute in Q3 and Q4 (depending on how long these prices last) and the premium in the region also indicates that local market conditions are favorable.” He added that the timing of Resolute’s acquisition of Conifex’s U.S. South sawmills appears to have been extremely favorable, with the sawmills likely generating attractive returns for Resolute.
- Year-to-Date Return: 8%
Canfor Corporation (TSX:CFP) – $18.38
Canfor is an integrated forest products company with interests in B.C., Alberta, North and South Carolina, Alabama, Georgia, Mississippi and Arkansas, as well as in Sweden with its majority acquisition of Vida Group. Canfor produces primarily softwood lumber and also owns a 54.8% interest in Canfor Pulp Products Inc., which is one of the largest global producers of market Northern Bleached Softwood Kraft Pulp and a leading producer of high performance kraft paper.
- Year-to-Date Return: 51%
West Fraser Timber Co. Ltd. (TSX:WFT) – $74.05
West Fraser Timber is a diversified wood products company, producing lumber (spruce-pine-fir (SPF) and southern yellow pine (SYP)), panels (plywood, medium-density fiberboard (MDF) and laminated veneer lumber (LVL)), pulp (northern bleached softwood kraft (NBSK) and bleached chemi-thermomechanical pulp (BCTMP)), newsprint, wood chips and energy. It operates 45 facilities that include lumber mills, panel mills, and pulp/paper mills. West Fraser Timber’s total lumber capacity is 7.2B board feet.
- Year-to-Date Return: 32%
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