Western Forest Products Inc. (WEF.TO)

He is bullish on the Canadian lumber space because it is leveraged to the US housing space and also because of the long horned beetle which has killed off a lot of supplies. They also have exposure to the far east market. Thinks the sector has a lot of upside over the next little while.

Unlike most sectors, forest stocks have double seasonality. They tend to go higher from around the middle of October right through until April of each year, and then from April to October, they go down. This is a great seasonal trade.

Good dividend, good management and good prospects. Had a weak quarter, so it took a bit of a hit, but the fundamentals are good going forward. This is a beneficiary of a strong US versus a weak Canadian dollar, which is one way to play it. You are also playing US housing. He sees something in the high $2’s a year out. If it dipped again, he would buy more. Dividend of about 3%.

Quality company in the forest product sector. 8-9 times earnings. Brookfield selling them has improved liquidity.

Brookfield got rid of its stake in WEF. The stock slipped based on this sell off. Will make money hand over fist if lumber prices increase. The dividend is sustainable and a good way to play a cyclical lumber industry. This is a good entry point.

A US lumber play, offshore Asia as well. Nice mix of lumber and log. Highest dividend in the group at 3.32%. Good free cash flow generator. Have about $150 million in assets on the books that he thinks they will sell. The coming quarter will be a little soft because of forest fires in BC. Thinks things will go very well for the next few quarters.

Thinks it is great news that Brookfield, since they have made their money, is exiting. Liquidity should be a lot better. Their exposure is not just to the US housing market, which he is very bullish on, but also to the Japanese and China markets.

This had a pretty big Short position and the sector was out of favour. Chart shows this just had quite a breakout and it is off and running.

(A Top Pick June 17/13. Up 77.36%.) Lumber based company in Western Canada. Has leverage to a recovering US housing sector. Also, exports some of their products to Japan and China. Over the next couple of years, lumber prices are going to be very strong, and this company is under leveraged. Have done some share buybacks. Nice dividend in place. Also, have some interesting non-core assets, which they may look to monetize or sell. Could be worth as much as $3 a share.

This is the junior small play in the area, so it is more volatile. He owned the bigger play, and sold it about 3 months ago, and has been considering getting back in this sector. Because of the overhang by Brookfield on this one, he would prefer West Fraser Timber (WFT-T) or Interfor (IFP-T). The 1^st sign of improvement in the housing market, might be the buying opportunity.

Canadian lumber stocks have 2 very distinct periods of seasonality. Historically the best time to Buy is around October, and the best time to take profits is around April. From April to October, seasonality is negative.

One of the more defensive names. Cash lumber prices have bottomed out after a downward slide, and then just in the last week there has been a reversal. Well-positioned, and has great defensible market share. His target price is $3 a share. Generating over 50% of its EBITDA for logs and its lumber mix is 73% weighted towards specialty grades. 3.5% dividend yield.

Brookfield wants to sell down their stake but will wait for the opportunity. It could put a cap on the stock price.

Comparing this against the Canadian bellwether, West Fraser Timber (WFT-T) it has substantially outperformed that. However, the spread is narrowing so we are getting into a period now where he expects early relative underperformance. He’d be careful. Also, he doesn’t like the pattern. If you own and have profits, he would take the profits.

The big gains have been made on this stock. If you have an interest in the forest sector, you can continue to hold.