In this article, we discuss the 10 best lumber stocks to buy now.
Housing prices across the United States have been skyrocketing in recent months amid supply shortages and rising prices for lumber and related products. According to an analysis by the National Association of Homebuilders, a Washington-based trade body, lumber prices have tripled over the past year and led to a more than $35,000 increase in the price of an average single-family home in the country. However, despite the increase in overall cost, house sales have been booming amid inflation fears and low interest rates.
In late May, the United States Census Bureau released the sales numbers for new residential units sold across the country, reporting that sales stood at 863,000 in April, a 48% increase from the estimated sales of houses in April 2020, but just below the 917,000 units sold in March. All indicators point to an increase in growth for housing in the coming months, lending credence to bull predictions for lumber stocks. Forestry information firm Forest Economic Advisors LLC expects lumber firms will extend price gains through the year as demand outstrips production.
Some of the stocks that stand to benefit from this boom include Rayonier Inc. (NYSE: RYN), Boise Cascade Company (NYSE: BCC), and UFP Industries, Inc. (NASDAQ: UFPI), among other lumber stocks. Rayonier Inc. (NYSE: RYN), Boise Cascade Company (NYSE: BCC), and UFP Industries, Inc. (NASDAQ: UFPI) stocks have all hit 52-week highs in recent weeks but taken a breather since then as market analysts expect plywood import and ramped up production to have an overall chain reaction on the housing sector.
However, the strong demand for new houses, driven by millennials, who made up the largest share of home-buyers in the US in 2020, and an overall increase in the median income for first-time buyers, which rose to $80,000 in 2020 from $68,000 in 2019, is likely to sustain the new lumber prices this year. It would be quite fair to say that lumber prices have returned as much to investors as other high growth stocks in recent months, rivalling crypto and uranium stock rallies, with future outlook looking decidedly bullish.
Lumber is not a commodity that has garnered much interest on Wall Street as the traditional finance world reels from the fintech revolution. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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With this context in mind, here is our list of the 10 best lumber stocks to buy now.
Best Lumber Stocks to Buy Now
10. Resolute Forest Products Inc. (NYSE: RFP)
Number of Hedge Fund Holders: 16
Resolute Forest Products Inc. (NYSE: RFP) is a Canada-based pulp and paper maker founded in 2007. It is placed tenth on our list of 10 best lumber stocks to buy now. The stock has offered investors returns exceeding 505% over the course of the past twelve months. The company makes and sells lumber products in Canada, Mexico, and the United States, among other countries. Some of the products the firm markets include paper, tissue, wood products, and market pulp.
Resolute Forest Products Inc. (NYSE: RFP) is a solid option for income investors. On June 10, the company declared a special dividend of $1 per share, payable to shareholders in early July. The firm also announced $50 million worth of additional projects related to wood products.
In quarterly earnings results, posted in late April, Resolute Forest Products Inc. (NYSE: RFP) reported earnings per share of $1.06, missing market expectations by $0.61. The revenue over the period was $873 million, up more than 26% year-on-year.
At the end of the first quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $367 million in Resolute Forest Products Inc. (NYSE: RFP), up from 15 the preceding quarter worth $247 million.
Just like Rayonier Inc. (NYSE: RYN), Boise Cascade Company (NYSE: BCC), and UFP Industries, Inc. (NASDAQ: UFPI), Resolute Forest Products Inc. (NYSE: RFP) is one of the best lumber stocks to buy now.
In its Q2 2020 investor letter, Chou Associates Management, an asset management firm, highlighted a few stocks and Resolute Forest Products Inc. (NYSE: RFP) was one of them. Here is what the fund said:
“As of June 30, 2020, the market price of Resolute Forest Products was US$2.11 per share, down 50% from the price at year end 2019. RFP has been a huge disappointment since our initial purchase some eight years ago. It shows how tough it is to turn around a troubled company despite the best efforts of management. Having said that, it is quite comical to experience how a commodity stock can be hammered beyond all logical comprehension. RFP paid a special dividend of US$1.50 a share in 2018, and it was trading as low as US$1.17 per share in April 2020. Back in March 2020, the company announced that it would buy back 15% of its common shares for US$100 million. At the lowest year-to-date price of US$1.17, the whole market capitalization would be approximately US$99 million. In other words, instead of buying back 15% of the company with US$100 million, it could repurchase 100% of the company at one point. RFP shares have since recovered 300% to US$4.69 as of August 25, 2020.
One bright spot has been their lumber operations. The high prices for lumber should make up the declines in newsprint and specialty papers. The COVID -19 pandemic has shifted the focus more towards lumber/pulp/tissue operations and I believe that should generate greater cash flow in the future.
In general, our experience with a commodity business that has virtually no pricing power is to be cautious when management talks about investing in new equipment or upgrades that would significantly lower the cost structure compared to its competitors. That may be true for six months to a couple of years, but in time, competitors will have a new cost structure that is as competitive if not superior to the company. It is the same treadmill where hardly anyone in the industry can make a decent return on the assets invested in the company. The same story can be seen repeatedly in various commoditized industries. There is no sustainable long-term advantage in a mediocre business with no pricing power. It is important not to get seduced by discount to book value. If the company cannot generate a decent return on book value over a long period of time, that book value is not worth much.”
9. Louisiana-Pacific Corporation (NYSE: LPX)
Number of Hedge Fund Holders: 30
Louisiana-Pacific Corporation (NYSE: LPX) is a Nashville-based buildings material firm founded in 1973. It is ranked ninth on our list of 10 best lumber stocks to buy now. The company’s shares have returned more than 139% to investors over the past year. The company markets products for home construction, repair and remodeling, as well as outdoor markets. The products made by the firm are sold in the United States, South America, Asia, Europe, and Australia.
On May 4, Louisiana-Pacific Corporation (NYSE: LPX) declared earnings for the first three months of 2021, posting earnings per share of $3.01, beating market predictions by $0.31. The revenue for the first quarter of 2021 was around $1 billion, up 70% year-on-year.
Louisiana-Pacific Corporation (NYSE: LPX) is another solid bet as an income stock option. It pays a regular and sizable dividend to shareholders. On April 30, the firm declared a quarterly dividend of $0.16 per share, in line with previous. The forward yield was 0.94%.
Out of the hedge funds being tracked by Insider Monkey, Australia-based investment firm Platinum Asset Management is a leading shareholder in Louisiana-Pacific Corporation (NYSE: LPX) with 4.2 million shares worth more than $237 million.
Just like Rayonier Inc. (NYSE: RYN), Boise Cascade Company (NYSE: BCC), and UFP Industries, Inc. (NASDAQ: UFPI), Louisiana-Pacific Corporation (NYSE: LPX) is one of the best lumber stocks to buy now.
In its Q1 2021 investor letter, L1 Capital, an asset management firm, highlighted a few stocks and Louisiana-Pacific Corporation (NYSE: LPX) was one of them. Here is what the fund said:
“Contributors to the gains were broad based, with the decision to selectively increase exposure to more cyclical sectors such as U.S. housing delivering strong returns. Recently, we further increased our exposure to U.S. housing through a new top 10 investment in Louisiana-Pacific Corporation. Louisiana-Pacific is a business in transition – rapidly evolving from a commodity-oriented forest products company to a specialty building solutions company. We expect a significant improvement in the quality of earnings over the coming years and near term we believe the market is significantly under-appreciating profitability during highly favourable operating conditions.”
8. West Fraser Timber Co. Ltd. (NYSE: WFG)
Number of Hedge Fund Holders: 25
West Fraser Timber Co. Ltd. (NYSE: WFG) is a Canada-based forestry company founded in 1955. It is placed eighth on our list of 10 best lumber stocks to buy now. The stock has returned more than 121% to investors over the past twelve months. The company has a diverse product list related to wood that includes lumber, panel, pulp, paper, and other wood-related items. It conducts business primarily in Canada and the United States. However, it also exports items to South America, Europe, and Asia.
West Fraser Timber Co. Ltd. (NYSE: WFG) posted earnings results for the first three months of 2021 on May 6, reporting earnings per share of $6.96, beating market estimates by $0.51. The revenue for the first quarter of 2021 was over $2.3 billion, up 162% year-on-year.
West Fraser Timber Co. Ltd. (NYSE: WFG) stock has been hit in recent weeks amid a record lull in lumber prices, ending a bull run for the industry that began in the middle of last year. However, market analysts expect the prices to recover soon amid high home-building demand.
At the end of the first quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $580 million in West Fraser Timber Co. Ltd. (NYSE: WFG).
Just like Rayonier Inc. (NYSE: RYN), Boise Cascade Company (NYSE: BCC), and UFP Industries, Inc. (NASDAQ: UFPI), West Fraser Timber Co. Ltd. (NYSE: WFG) is one of the best lumber stocks to buy now.
7. Weyerhaeuser Company (NYSE: WY)
Number of Hedge Fund Holders: 38
Weyerhaeuser Company (NYSE: WY) is a Washington-based real estate investment trust that manages timberlands. It was founded in 1900 and is ranked seventh on our list of 10 best lumber stocks to buy now. The company’s shares have returned more than 49% to investors over the course of the past year. The company is among the largest wood product manufacturers in the United States, controlling more than 10 million acres of timberlands in the US and employing close to 10,000 people.
Weyerhaeuser Company (NYSE: WY) posted earnings results for the first three months of 2021 in late April, reporting a revenue of more than $2.5 billion, up more than 45% year-on-year but missing market expectations by $60 million.
On May 13, Weyerhaeuser Company (NYSE: WY) declared a quarterly dividend of $0.17 per share, in line with previous. The forward yield was 1.78%. The dividend will be payable to shareholders by the middle of June.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in Weyerhaeuser Company (NYSE: WY) with 19.1 million shares worth more than $681 million.
Just like Rayonier Inc. (NYSE: RYN), Boise Cascade Company (NYSE: BCC), and UFP Industries, Inc. (NASDAQ: UFPI), Weyerhaeuser Company (NYSE: WY) is one of the best lumber stocks to buy now.
In its Q3 2020 investor letter, Third Avenue Management, an asset management firm, highlighted a few stocks and Weyerhaeuser Company (NYSE: WY) was one of them. Here is what the fund said:
“Third Avenue has long championed enterprises with sound business practices run by aligned control groups that exhibit strong stewardship. Within Third Avenue’s real estate strategy, this oftentimes leads the Fund to “pass” on investments in companies with uncertain environmental liabilities, business models that could be deemed predatory, and corporate governance structures that are stacked against key stakeholders. Consequently, the select-set of real estate and real estate-related business that make it into the Third Avenue Real Estate Value Fund represent some of the true industry leaders in respect to their ESG practices, including Weyerhaeuser, that own more than 16 million acres of timberlands and sequester more carbon than any other privately-held enterprises globally (to our knowledge)— an underappreciated attribute that may ultimately have incremental value through a carbon-credit initiative or even strategic value for larger enterprises seeking to offset emissions.”
6. PotlatchDeltic Corporation (NASDAQ: PCH)
Number of Hedge Fund Holders: 26
PotlatchDeltic Corporation (NASDAQ: PCH) is a Washington-based forest products company founded in 1903. It is placed sixth on our list of 10 best lumber stocks to buy now. The stock has offered investors returns exceeding 41% over the course of the past year. The company sells lumber and related products and owns close to 2 million acres of timberland spread across more than five states in the US. In addition to interests in the wood business, the firm also has stakes in the mining and leasing markets.
In quarterly earnings for the first quarter of 2021, posted on April 26, PotlatchDeltic Corporation (NASDAQ: PCH) declared a revenue of more than $354 million, up almost 70% year-on-year and beating market predictions by almost $13.5 million.
PotlatchDeltic Corporation (NASDAQ: PCH) is one of the best dividend stocks in the lumber market. On June 2, the company declared a quarterly dividend of $0.41 per share, in line with previous and payable to shareholders by the end of June.
At the end of the first quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $152 million in PotlatchDeltic Corporation (NASDAQ: PCH), up from 23 in the previous quarter worth $234 million.
Just like Rayonier Inc. (NYSE: RYN), Boise Cascade Company (NYSE: BCC), and UFP Industries, Inc. (NASDAQ: UFPI), PotlatchDeltic Corporation (NASDAQ: PCH) is one of the best lumber stocks to buy now.
In its Q1 2021 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and PotlatchDeltic Corporation (NASDAQ: PCH) was one of them. Here is what the fund said:
“We exited two businesses in the period (which includes) PotlatchDeltic. In both cases, share price went above our appraised value, even though we continue to view the businesses and management teams highly and hope to have the opportunity to partner with them again. We have owned the assets at PotlatchDeltic successfully four times now in the last two decades and have great respect for the management team.”
5. Boise Cascade Company (NYSE: BCC)
Number of Hedge Fund Holders: 16
Boise Cascade Company (NYSE: BCC) is an Idaho-based company that makes and sells wood products. It was founded in 1957 and is ranked fifth on our list of 10 best lumber stocks to buy now. The company’s shares have returned more than 71% to investors over the past year. The wood products marketed by the company are used in construction of homes, repair or remodeling, as well as light commercial and industrial purposes. The lumber, plywood and other items sold by the firm are used as building materials.
On May 6, Boise Cascade Company (NYSE: BCC) posted earnings results for the first quarter of 2021, reporting earnings per share of $3.76, beating market expectations by $1.14. The revenue over the period was $1.8 billion, up 55% year-on-year.
On March 12, investment advisory Bank of America downgraded Boise Cascade Company (NYSE: BCC) stock to Underperform from Neutral with a price target of $54 on the back of fears of plywood import impacting the housing market in the Americas.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Royce & Associates is a leading shareholder in Boise Cascade Company (NYSE: BCC) with 205,203 shares worth more than $12.2 million.
4. UFP Industries, Inc. (NASDAQ: UFPI)
Number of Hedge Fund Holders: 16
UFP Industries, Inc. (NASDAQ: UFPI) is a Michigan-based lumber company founded in 1955. It is placed fourth on our list of 10 best lumber stocks to buy now. The stock has returned more than 50% to investors over the course of the past year. The company sells wood-related products in North America, Europe, Asia, and Australia. It markets outdoor living products, garden products, and engineered wood products, among others. The firm has a market cap of over $4.5 billion and posted more than $5 billion in revenue last year.
UFP Industries, Inc. (NASDAQ: UFPI) declared quarterly earnings on April 21, reporting earnings per share of $1.67, beating market expectations by $0.79. The revenue over the period was $1.8 billion, up 77% year-on-year.
UFP Industries, Inc. (NASDAQ: UFPI) is a great stock for income investors. In February, the firm raised its dividend by 20%. On March 30, investment advisory Stifel gave the stock a Buy rating with a price target of $75.
At the end of the first quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $171 million in UFP Industries, Inc. (NASDAQ: UFPI), down from 19 in the preceding quarter worth $118 million.
3. Rayonier Inc. (NYSE: RYN)
Number of Hedge Fund Holders: 18
Rayonier Inc. (NYSE: RYN) is a Florida-based real estate investment trust founded in 1926. It is ranked third on our list of 10 best lumber stocks to buy now. The company’s shares have offered investors returns exceeding 43% over the past twelve months. The company owns and operates timberlands in the United States and New Zealand. It has business interests in real estate in addition to the wood and lumber markets. The company has a market cap of over $5 billion and posted more than $859 million in revenue last year.
In quarterly earnings results, posted on May 5, Rayonier Inc. (NYSE: RYN) reported a revenue of close to $180 million for the first three months of 2021, up more than 25% year-on-year but missing market estimates by $20 million.
Falling lumber prices have hit timberland real estate investment trust in recent weeks, with Rayonier Inc. (NYSE: RYN) falling 0.9% in value on May 17. This comes after a record year-long rally that saw many lumber stocks climb to 52-week highs in early May.
Out of the hedge funds being tracked by Insider Monkey, London-based firm Impax Asset Management is a leading shareholder in Rayonier Inc. (NYSE: RYN) with 8.9 million shares worth more than $287 million.
In its Q3 2020 investor letter, Third Avenue Management, an asset management firm, highlighted a few stocks and Rayonier Inc. (NYSE: RYN) was one of them. Here is what the fund said:
“Third Avenue has long championed enterprises with sound business practices run by aligned control groups that exhibit strong stewardship. Within Third Avenue’s real estate strategy, this oftentimes leads the Fund to “pass” on investments in companies with uncertain environmental liabilities, business models that could be deemed predatory, and corporate governance structures that are stacked against key stakeholders. Consequently, the select-set of real estate and real estate-related business that make it into the Third Avenue Real Estate Value Fund represent some of the true industry leaders in respect to their ESG practices, including Rayonier, that own more than ‘2.7 million’ acres of timberlands and sequester more carbon than any other privately-held enterprises globally (to our knowledge)— an underappreciated attribute that may ultimately have incremental value through a carbon-credit initiative or even strategic value for larger enterprises seeking to offset emissions.”
2. Enviva Partners, LP (NYSE: EVA)
Number of Hedge Fund Holders: 7
Enviva Partners, LP (NYSE: EVA) is a Maryland-based wood company founded in 2004. It is placed second on our list of 10 best lumber stocks to buy now. The company’s shares have returned more than 43% to investors over the past year. The company is most famous for making and selling sustainable wood pellets, a coal alternative gaining popularity as environmental concerns grow over coal mining. The company aims to grow more trees and eventually replace coal as an energy source.
On April 28, Enviva Partners, LP (NYSE: EVA) posted earnings results for the first quarter of 2021, reporting earnings per share of -$0.27, missing market predictions by $0.04. The revenue over the period was $241 million, up close to 18% year-on-year.
Enviva Partners, LP (NYSE: EVA) is a great income stock. On April 28, the firm declared a quarterly dividend of $0.785 per share, an increase of 0.6% from the previous dividend. The forward yield was 6.34%.
At the end of the first quarter of 2021, 7 hedge funds in the database of Insider Monkey held stakes worth $250 million in Enviva Partners, LP (NYSE: EVA), down from 9 in the preceding quarter worth $252 million.
1. DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT)
Number of Hedge Fund Holders: 4
DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT) is a Canada-based company that offers interior software and construction solutions. It was founded in 2003 and is ranked first on our list of 10 best lumber stocks to buy now. The stock has returned more than 143% to investors over the course of the past twelve months. The firm software interior construction technology as well as interior construction solutions for walls, ceilings, and floors, among others. It uses technology to help out with construction efforts.
On May 5, DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT) posted earnings results for the first quarter of 2021, reporting earnings per share of -$0.15, missing market predictions by $0.10. The revenue over the period was close to $30 million, down 28% year-on-year.
On June 8, DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT) announced that it had opened a manufacturing facility in South Carolina in an investment worth over $18 million to cater to customers better on the East Coast of the United States.
At the end of the first quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $51 million in DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT), down from 5 in the preceding quarter worth $39 million.
You can also take a peek at Billionaire Stan Druckenmiller’s Top 10 Stock Picks and Billionaire Julian Robertson On Interest Rates and His Top Stock Picks For 2021.
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Disclose. None. 10 Best Lumber Stocks to Buy Now is originally published on Insider Monkey.
