Wood Stocks Are Burning Up The Charts

A few weeks ago the headlines talked about how Canada was hurting the US Timber business. I was probably like you and taken aback by such a claim, and then tried to figure out if it was meaningful or not. In the end I decided not to do anything about it, but that was an error.

There were clear indications that prices would be rising for consumers, but like many I did nothing. There were a group of people did something and they were the analysts that cover the building products stocks and more specifically the wood providers.

A quick check of the Zacks Industry Rank shows the group as being a very strong one. I see ten total names in the space and half of them have a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). You can find the Zacks Industry Rank on this page (https://www.zacks.com/stocks/industry-rank/industries/) and you will see that on 5/17/2017 Building Products – Wood is #14 on the list. The industry has up from #15 last week and #63 at the start of April.

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What Wood You Do?

When we drill down in the link for the Building Products – Wood (https://www.zacks.com/stocks/industry-rank/industry/building-products-wood-26) we see that the industry group has underperformed even as the estimates for half of the group have been rising.

Investors that believe that fundamentals drive stock performance will be watching the earnings estimates of stocks. Here is the list of the five stocks in this space that are seeing positive earnings estimate revisions.

Boise Cascade (BCC)

This is a Zacks Rank #1 (Strong Buy) and also carries a VGM style score of “A” while sporting a 17x forward earnings multiple.

https://www.zacks.com/stock/quote/BCC

Boise Cascade, L.L.C. Price and Consensus

Boise Cascade, L.L.C. Price and Consensus | Boise Cascade, L.L.C. Quote

Potlatch Corporation (PCH)

This is another Zacks Rank #1 (Strong Buy), but I like this stock a little more on the idea that it has a Growth Style Score of “A” and a Value Style Score of “D” – but I am biased to growth stocks. I like to see the divergence between a high growth score and a low value score as it tells me that I am on the right path before I do any deep research. At 22x forward earnings, PCH is that expensive, but then again we are talking about a timber stock.

https://www.zacks.com/stock/quote/PCH

Potlatch Corporation Price and Consensus

Potlatch Corporation Price and Consensus | Potlatch Corporation Quote

Trex Company (TREX)

This is a stock that I am going to have do some more research on. The stock is a Zacks Rank #2 (Buy) but has a set of “F’s” for the value, growth and momentum style scores. When the style scores are off that much and the estimates are moving higher I need to find out why.

https://www.zacks.com/stock/quote/TREX

Universal Forest Products (UFPI)

Is another Zacks Rank #2 (Buy) stock that has the type of Style Scores that will bring the value players into this name. The Value Style Score of B is very good, with a 15x forward earnings multiple, but I am afraid of what may lie beneath the surface with a Growth Style Score of “F.” This stock needs more research, but clearly the analysts already like it.

https://www.zacks.com/stock/quote/UFPI

Weyerhaeuser Company (NYSE:WY)

The next Zacks Rank #2 (Buy) is the biggest stock in the group with a market cap of $24.9B. That alone makes me like the stock as the bigger names tend to be a little safer right now. The VGM for this stock is an “F” so that doesn’t make me what to run out and add this stock without doing more research.

https://www.zacks.com/stock/quote/WY

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