Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Should You Be Buying Lumber/Wood Stocks Now?

Published 01/22/2021, 04:58 AM
Updated 07/09/2023, 06:31 AM

The Zacks-classified Building Products – Wood industry has done exceptionally well over the past year, growing 31.6%. That’s nearly double the S&P 500, which grew 18.0%.

What has been driving these stocks to crazy highs? And will this continue, or will there be a pullback later this year? And in either case, is this a good time to buy some shares? Let’s find out.

The main reason these stocks are soaring is sky-high lumber prices. And that has happened because of a number of things happening all at once.

First, 2020 started out with low inventories because there were issues in the Canada supply chain.

And then there were the western wildfires in August and September and the hurricane season in the southeast, all of which served to disrupt production.

And then we had the pandemic, which other than disrupting production also forced people to stay indoors, leading to a boom in repair/remodeling. While there was a shortage in logs and all kinds of treated wood, many people were building decks. Others were looking for a larger home, or deciding to finally settle down, or simply, to make the most of the low mortgage rates. Which of course meant a housing construction boom.

That situation hasn’t changed materially in the new year. So lumber prices remain high and considering the inventory situation, are likely to remain so. While there could be pullbacks at times, the tight inventory situation and strong housing market mean generally that pricing will remain strong.

But obviously, they can’t go endlessly higher. Very high pricing is already putting homes out of reach for some. The new administration’s proposed $15,000 credit for first-time buyers could help in the spring buying season however.

As things stand now, we appear to be looking at relatively strong pricing with volumes stabilizing through the year, which means there still are some gains to be had here.

And you’re also spoilt for choice because there are a large number of Zacks #1 (Strong Buy) and #2 (Buy) ranked stocks that can generate those near-term gains.

These would be #1 ranked Norbord (NYSE:OSB) Inc. OSB, which offers wood panels in the U.S., Europe and Canada; Potlatch Corp. PCH, which is a Real Estate Investment Trust (REIT) with timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi; and Weyerhaeuser Company (NYSE:WY) WY, which is a broad-scale provider of logs, hardwood lumber, timber, poles and plywood, as well as minerals, oil, gas, seeds and seedlings across the world.

Some of the #2 ranked stocks include LouisianaPacific Corp. LPX, which is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products as well as exterior siding for use in residential, industrial and light commercial construction; Boise Cascade (NYSE:BCC), L.L.C. BCC, which manufactures engineered wood products, plywood, lumber and particleboard and distributes decking, EWP, lumber, panel, particleboard, MDF products, etc in the U.S. and Canada; and Masonite International (NYSE:DOOR) Corporation DOOR, which designs and manufactures interior and exterior doors.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.

Click here for the 6 trades >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Weyerhaeuser Company (WY): Free Stock Analysis Report

LouisianaPacific Corporation (LPX): Free Stock Analysis Report

Potlatch Corporation (PCH): Free Stock Analysis Report

Masonite International Corporation (DOOR): Free Stock Analysis Report

Boise Cascade, L.L.C. (BCC): Free Stock Analysis Report

Norbord Inc. (OSB): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.