# Western Forest Products (WEF)



## londoncalling (Sep 17, 2011)

I've had this one on my radar for the past while and was waiting for the Q3 results. I know another member on this board was buying back in 1.3X range. Curious to see what others thought of the results. Lots of commentary about safety and operational changes as well as a recap of the corporate restructuring. 17% increase in sales on less volume due to commodity price. EPS of .04 leaves a payout ratio of 50% seems reasonable. High free cash flow, a dividend and share buybacks are what drew my attention to this stock originally. Thoughts and insight appreciated.

http://web.tmxmoney.com/article.php?newsid=63648791&qm_symbol=WEF

Cheers


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## MrMatt (Dec 21, 2011)

londoncalling said:


> I've had this one on my radar for the past while and was waiting for the Q3 results. I know another member on this board was buying back in 1.3X range. Curious to see what others thought of the results. Lots of commentary about safety and operational changes as well as a recap of the corporate restructuring. 17% increase in sales on less volume due to commodity price. EPS of .04 leaves a payout ratio of 50% seems reasonable. High free cash flow, a dividend and share buybacks are what drew my attention to this stock originally. Thoughts and insight appreciated.
> 
> http://web.tmxmoney.com/article.php?newsid=63648791&qm_symbol=WEF
> 
> Cheers


I'm long WFT, smaller dividend, but I think it's a better company.
WFT & CF are bigger with better US exposure, which depending on your POV is a plus or a minus.


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## humble_pie (Jun 7, 2009)

london i don't have any insight & probably not much in the way of thoughts ... but i did own western forest for more than a year ... sold it around 1.51 after they announced the recent share buyback but only because the stochs & charts were suggesting a non-directional period coming up.

as i recall, this company primarily sells lumber product to the japanese construction industry; company is majority owned by brookfield asset management or brookfield capital (so hard to keep all the brookfields apart.)

as u know there are others in cmf who are deeply knowledgeable in the forest products sector; hopefully one will pass by & leave a comment or 2. In the meantime, another nice offering from londoncalling.


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## londoncalling (Sep 17, 2011)

Thanks for the replies. WFT is fine but I am looking for something a little less popular which may mean a little more risky. Should have added a lumber stock a couple years ago but was just starting investing then and didn't quite know what I was doing. I still have a lot to learn and a ways to go but I keep reading and learning as days go by. 

As always I am amazed how you seem to know a little something about almost every stock that gets a thread HP. Aside from being a journeyman carpenter and a contractor in a prior stage of life I know zero about the forest industry which may be why it's taken me so long to enter into this sector. I am not sure if the recent run up is just the beginning, or if it will peter out in the short term. Seasonally lumber is enter a period of strength. The PE is/was recently under 10 which bodes well with me. May have to listen to today's conference call to see if I can find some more info until a resident cmf expert sheds further light.

In regard to being another nice offering this remains to be seen. Only time will tell. I think the sector has some room to go just a question of when and how it will unfold.

Cheers


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## londoncalling (Sep 17, 2011)

CEO was on BNN this week to explain and update their operations as he tries to acquire more attention/$ to this company. It is nearing 52 week highs and I have seen it go up 18c since I start seriously considering a position. Oh investor psyche is playing tricks with me. 

Cheers


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## londoncalling (Sep 17, 2011)

WEF has gone from about $1.50 since I started following it to a close of $1.81 yesterday. Missed a nice climb.


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## Eder (Feb 16, 2011)

Although I have enjoyed the ride I think WEF has a longer ride in store for 2014. Dumping their pulp liabilities was the smartest thing they did...borrowing to upgrade their manufacturing is #2.


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## Feruk (Aug 15, 2012)

I love the P/E below 10. But that raises my biggest question... why is the P/E below 10? I own Weyerhauser (WY:US) and have done great on it. Their P/E is nearly 30. P/E of WFT is ~17. So what's kept investors away from this name? There is a risk here that hasn't been identified that doesn't exist in the other names... What is it?


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## My Own Advisor (Sep 24, 2012)

Looking at this one as well. Eligible dividends as well.


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## daddybigbucks (Jan 30, 2011)

Feruk said:


> I love the P/E below 10. But that raises my biggest question... why is the P/E below 10? I own Weyerhauser (WY:US) and have done great on it. Their P/E is nearly 30. P/E of WFT is ~17. So what's kept investors away from this name? There is a risk here that hasn't been identified that doesn't exist in the other names... What is it?


I looked into this one before. The reason i stayed away is that their infrastructure is at the end of its life. They are running on the high of the price of lumber but i think it will be their last hurray. hence the dividend as well.
no buyout possible, no future growth.

just my opinion of course but that is why i wouldnt buy in.


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## Eder (Feb 16, 2011)

The way I see it sawmills are like gold mines...both are pretty worthless unless located on good ground. The West coast of BC has the largest logs and fasted growing commercial white wood in the world. They have good ground. 
They are an in progress turn around story....lots of risk.


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## humble_pie (Jun 7, 2009)

what had been keeping me away from western forest products were the terrible stories about the pine beetle. Entire forests & mountainsides laid waste.

at one point i read about engineered lumbers being built out of weakened, beetle-diseased timber. This truly horrified me.

everywhere you go in canada, in just about every town & city, you can find buildings pre-dating WW II whose beams & joists are made out of magnificent, knot-free Douglas fir. The grade known as "clear." It's sad that we are never going to find such timbers again.

some old beams are being carefully salvaged from tear-downs & recycled - a douglas firm beam in good condition can easily last a century or two if protected - but otherwise the douglas beams one can find in lumber yards these days are knotty, bent, often split & rarely more than 6 or 7 metres in length.

of course, this lament has nothing to do with any particular stock. It just has to do with mourning the passing of 2 centuries of magnificent old-growth timber.


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## daddybigbucks (Jan 30, 2011)

humble_pie said:


> some old beams are being carefully salvaged from tear-downs & recycled - a douglas firm beam in good condition can easily last a century or two if protected - but otherwise the douglas beams one can find in lumber yards these days are knotty, bent, often split & rarely more than 6 or 7 metres in length.


I agree. Douglas fir is one of the most beautiful woods out there with its red tinge.

I used to work with big douglas fir doing timber frame buildings. And it was amazing to get 26' long 12" x12" timbers that are straight as an arrow.
Here is a building we built in okotoks, that used those big timbers.
They were standing dead trees that were killed by a fire 5 years previous.


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## Eder (Feb 16, 2011)

There is no pine beetle problem thankfully on the West coast of BC or the islands..no pine trees. It has been a tragedy that continues today with no real solution.

http://nwcoastenergynews.com/wp-content/uploads/2012/12/BCpinekillmap.jpg

Large clear fir cants and prime logs generally are sold to Asia where they command premium prices..(kind of like our tuna) but are available in Canada if you can afford it, several custom sawmills exist in Southern Alberta that can supply these.


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## bflannel (Apr 21, 2013)

As Eder mentioned, mountain pine beetle doesn't really affect western as their forests aren't pine and therefore their wood products are different than say CF or WFT. Second and third growth Douglas fir stands can have large diameter relatively clean bottom logs that go to Japan, another large diameter rough log for china, and then an assorted mix of logs… at 85 years age. This is pretty sustainable wood fibre we're talking about too.

Now as far as western goes, they are scattered on the west coast in different forest types but have high value helicopter wood projects underway and a massive amount of high value wood planned in one of their operating areas. So if you think high quality export lumber prices are going up, they will make a lot of money. If you think cheaper wood higher volume is going to be more profitable then you look at NBD, WFT, CF etc.

I own NBD and will hold for the foreseeable future.
I will purchase western sooner rather than later.


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## londoncalling (Sep 17, 2011)

For me today was sooner. I think this company has great long term prospects. I have been pouring over their numbers, properties as well as interviews and media releases. Today's entry price was higher than I originally hoped but I only took a nibble. I don't believe it will return to where it was a few months ago so I needed to reconsider what I felt was an acceptable price. Still got a bid in at a much lower price for a much larger tranche. 

Cheers


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## londoncalling (Sep 17, 2011)

http://web.tmxmoney.com/article.php?newsid=65047172&qm_symbol=WEF

I was nowhere near an internet connection for the past 36 hours and as a result I missed a chance to buy this dip/blip. I have a feeling Brookfield will exit their position in dribs and drabs and will be more attentive for the next go round.


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## Beaver101 (Nov 14, 2011)

Is this small cap stock a good long-term buy still? I'm looking for an (affordable) stock in this sector to keep for at least the next 3 or 5 years.


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## Jungle (Feb 17, 2010)

Norm has it as an all star for moneysense 2015 top 200. I have a position and will be holding for a year.


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## Beaver101 (Nov 14, 2011)

Jungle said:


> Norm has it as an *all star for moneysense 2015 top 200*. I have a position and will be holding for a year.


 ... good to know ... I'll keep my eyes open for a buying opportunity. Thanks for the response.


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## Eder (Feb 16, 2011)

There was a never ending stream of Japanese log carriers anchored near their yard all Summer by Nanaimo...


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## daddybigbucks (Jan 30, 2011)

yes the Japanese just love our wood. 100+ yr old wood is a rarity in japan. 

WEF has a niche market. I did a review of the company before and most of their equipment was very old. I thought they were going to update machinery but instead they instated a dividend. I didn't like that move and haven't looked since.

But even ANS is rising for no apparent reason. OSB prices are down and it should be following.

I think its always good to have some forestry stock in your portfolio because the margins are usually very good. Just have to ride the fluctuation of pricing.


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## banjopete (Feb 4, 2014)

Also keep in mind as our dollar sinks most exporting businesses will enjoy the rates of exchange. I'd also add one more caveat that the softwood lumber battle with the US isn't over or entirely in the past at this point. Due to the US' position on the stumpage and negative stumpage rates being charged for much of the salvage wood coming out of the the MPB affected areas of BC, many of the US producers are still sore about the competition environment. There's still another year in the truce on collecting tariffs but I'd be wary of holding our big lumber exporters as the expiry date begins to approach next Oct. '15.


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## daddybigbucks (Jan 30, 2011)

all the forestry stocks are on the "biggest dollar gainers" this morning.
I don't know what is causing this rush to this sector.


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## Beaver101 (Nov 14, 2011)

I have no problem with that! Good to know, thanks!


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## banjopete (Feb 4, 2014)

A nod in money sense magazine doesn't hurt for one, and I think more importantly is canadians are looking for places to invest that isn't oil at the moment, same reason FTS has been on a tear.


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## Jungle (Feb 17, 2010)

Anyone know why this stock would fall 15-20% in the last week or so, then bounce back up 15% in one day?


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## Synergy (Mar 18, 2013)

Jungle said:


> Anyone know why this stock would fall 15-20% in the last week or so, then bounce back up 15% in one day?


US housing worries over the last few wks resulted in softer lumbar prices. Lumbar stocks benefit from a weaker CDN dollar - the bounce today. At least that's was I overhead from one of the talking heads on BNN this afternoon!


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## Jungle (Feb 17, 2010)

Great info! Good to know.


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## banjopete (Feb 4, 2014)

I would imagine as our CAD plunges, and if signs still show any robustness in the US the outlook for our lumber producers grows. We sell much of our lumber to the US, but whether that is offset by what I imagine is decreased domestic demand?


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## humble_pie (Jun 7, 2009)

as best i can recall when i held WEF, its principal market was japan. The famous wooden houses of japan. WEF's trees are perfectly suited for the lumber products that japanese home builders require. Something about re-building after fukushima, is when i bought.

just speculating if WEF's price did rock up & down by 15% recently: a) something in japanese news (currency? interest rates?) or b) something to do with majority owner/former majority owner brookfield


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## londoncalling (Sep 17, 2011)

http://web.tmxmoney.com/article.php?newsid=73326938&qm_symbol=WEF


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## GoLong (Feb 21, 2015)

Sold mine a week or so ago at $2.65 as didn't have high hopes for earnings report.

Weak demand out of China/Japan, which accounts for 30-40% of business and lumber prices being down had a negative impact. 

Lot of people discussing how the impact of USD/CAD would have an impact on the earnings but remember that the US is only about 10% of earnings so even going into 1Q15, it won't be that big of a tailwind. 

Overall I do really like the company, bought in last year on a dip (below $2.30) and plan to do that this year. The summer has been a period of seasonal weakness for lumber companies and I expect it to be no different this summer (last time around June-July I think it was it dropped to around $2.06-$2.10). That's when I plan to get back in.


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## londoncalling (Sep 17, 2011)

Summer is also when I plan to add if I haven't allocated money elsewhere (looking at some companies in EUR/UK). I like the diversity of this company in both products and customers. Long term hold for me. 

Cheers


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## Beaver101 (Nov 14, 2011)

londoncalling said:


> Summer is also when I plan to add if I haven't allocated money elsewhere (looking at some companies in EUR/UK). I like the diversity of this company in both products and customers. *Long term hold for me.
> *
> Cheers


 ... same here - long term hold - will start a DRIP at the lower prices. Set it and forget it ... or until retirement - cash out time. each:


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## 299889 (Jan 5, 2015)

This price crash brought my portfolio down! Hoping for it to bounce back.


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## Beaver101 (Nov 14, 2011)

This is what's called a learning experience ... what goes up comes down and what goes down also rises up. You'll be fine - I hope. I'm on the same bus with you on this one. Cheers,


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## GoLong (Feb 21, 2015)

Lumber prices are down lately. 1Q15 may be poor because of this. Average realized price will be much lower. That being said, if it's under $2.20 I'll probably be a buyer


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## daddybigbucks (Jan 30, 2011)

This stock is completely manipulated by day traders and penny stock guys.
It doesn't follow any pattern or any other lumber stock.
It's a lottery stock


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## GoLong (Feb 21, 2015)

Bought in a week or so ago. A bit too early given it's now down at $2 but nonetheless I am still pleased with what I got in at. I'd average down a bit more but already bought at a decent size so don't want to be too overweight. 

^ wouldn't agree with you on that one. It is more volatile than some others like IFP but for the most part it moves in line with the sector, which is largely influenced by lumber prices, of course, and general sentiment regarding the state of the global economy (specifically China for WEF). Sure, the odd day WEF may be up/down while the other lumber co's. are moving the opposite direction but that will happen every so often with any stock. At the beginning of the summer last year WEF did have some price manipulation but that was due to Brookfield exiting a large portion of their position, which can't be unloaded in 1 day. Here is a picture of WEF with some of it's peers for the past year. I'd say it's hard to argue it doesn't follow the general up and down trends.


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## humble_pie (Jun 7, 2009)

GoLong said:


> ... it doesn't follow the general up and down trends.
> 
> View attachment 3849



so true, over the past year it performed worst of the lot!

i've never been able to understand why, in cmf forum, some stocks get adopted by the herd & followed slavishly, like they are bell-wethers. COS is another example.

was there something wrong with west fraser timber - which performed best according to this chart - that nobody's mentioning, while folks keep doting fondly upon slumping western forest products?


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## londoncalling (Sep 17, 2011)

I can't speak for the board but here is why I chose WEF over Fraser:

Fraser operates primarily in NA (mainly tied to Asia) I know the Asian market wass cooling and the US housing was taking off but for me this is a long long long term play. (I also own NBD so no need for WFT for me.

smaller market cap
product diversification so many product options from this one. not just a lumber or plywood or OSB play
Brookfield unloading of stock created a buying opportunity
pine beetle brought down the sector but WEF has virtually no exposure to pine beetle infestation. 
Real estate values of WEF properties. Excellent properties along the BC coast (may be my only chance to own some coastal property in BC for my retirement ;P)

My ACB is 1.88 so I am still smiling. If yield approaches 4% I will likely be adding. 

Currently focused on Canadian banks, mid term energy plays and accumulating cash for a correction be it here(C$), there (US$) or everywhere (global $)

Cheers


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## Jungle (Feb 17, 2010)

I had a limit order hit at $2 adding to the position.


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## Getafix (Dec 29, 2014)

Anyone know why IFP is down today?


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## Jungle (Feb 17, 2010)

Broad market is down, sentiment still negative due to past earnings disappointment. China and Japan demand is down.


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## londoncalling (Sep 17, 2011)

got a bid in to lower ACB. One of many. Let's see what sticks.


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## GoLong (Feb 21, 2015)

Seems like lumber prices may have found a bottom. Couple revisions to PT's from RBC given the reduced lumber prices but it should be noted that IFP, WEF, and CFP lead the way with the most upside at around 45% each. That being said, I'm not holding my breath for a quick 10% pop in lumber prices and consequently a jump in the sector lol. Think it'll take some time. Just my opinion.


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## NSVet (Dec 13, 2014)

Just received my first dividend ever from WEF.  Super happy to see it in my Questrade account. I'm going to add to the position if it drops back to $1.80 or so. If it builds back to $2.60+, I'd consider a sell. Otherwise I'll just hang on and ride it.


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## Beaver101 (Nov 14, 2011)

^ same here ...   each:


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## Jungle (Feb 17, 2010)

I put a limit order to add more at 1.80 but she's going up today we'll see if it gets that low in the mean time.


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## GoLong (Feb 21, 2015)

Jungle said:


> I put a limit order to add more at 1.80 but she's going up today we'll see if it gets that low in the mean time.


I honestly can't see it hitting that. Unless timber prices reverse and drop another 15% then it's possible. The whole sector (IFP, CFP, WEF, WFT) sold off more than 20% from their peak in the past like 5 weeks, which I believe is overblown is a bit overblown. That's just what my thinking is though. If it hit $1.80 then I'd probs average down with you


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## GoLong (Feb 21, 2015)

GoLong said:


> I honestly can't see it hitting that. Unless timber prices reverse and drop another 15% then it's possible. The whole sector (IFP, CFP, WEF, WFT) sold off more than 20% from their peak in the past like 5 weeks, which I believe is overblown is a bit overblown. That's just what my thinking is though. If it hit $1.80 then I'd probs average down with you


Looks like I stand mistaken lol. Getting close to hitting that $1.80 mark


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## Beaver101 (Nov 14, 2011)

^Thanks for the update ... time for shopping. :biggrin:


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## Jungle (Feb 17, 2010)

Yup, limit hit today $1.80 adding to the position. Next stop, WJA or more WEF....hmm


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## GoLong (Feb 21, 2015)

^ nice...too bad I don't have much cash in port. to average down with ya aha

What's the reasoning for WJA's fall-off recently? Don't follow them


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## favelle75 (Feb 6, 2013)

Anyone adding to this tomorrow. I've been following since December. 4% yield and at a 52-week low. I think I'm a buyer come morning time tomorrow.


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## 1980z28 (Mar 4, 2010)

Tried for 2k shares on tuesday @ 1.78,but trade at TDW did not work for trades until after 2:30,so missed,I will see how the day goes,sold more oil on tuesday so have extra cash


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## Flash (Nov 25, 2014)

Got in for another 1.2k shares and averaged down. Avg cost for me 1.92 now


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## 299889 (Jan 5, 2015)

How do people see this stock rebounding? Is wood on the way back?


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## Flash (Nov 25, 2014)

If it's not now, it will be in the future
Also plan to keep this stock for the long term


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## GoLong (Feb 21, 2015)

Thoughts on upcoming earnings?

IFP reports later this week and then WEF reports next week.


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## bflannel (Apr 21, 2013)

The China sort market became flooded/crashed. I doubt WEF earnings will reflect it entirely already but I can't see them out performing. Either way this isn't the end of the world.


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## Mechanic (Oct 29, 2013)

WEF has been doing well just lately. I did buy some at around $2, then added some more when it when it went lower so avg just under $1.91. I have quite a bit invested in energy and have been trying to add more diversification.


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## londoncalling (Sep 17, 2011)

This one seems to be in a range 1.8X to about 2.3X for the past year or more. I keep adding each time it gets below 1.90 but I am considering swing trading this. My fear is that it will break to the upside when I sell in the 2.30 range. I may have to overweight the position so that if it gets away I can still keep enough for the long term.


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## doctrine (Sep 30, 2011)

Here is an interesting stock. After averaging about $2.50 a share from 2014 to mid 2019, the stock has about as much bad news as you could imagine. US tariffs, coronavirus (18% of sales to China), changing BC regulations, high input costs, low supply, crashing lumber prices all last year, and most of all, the company operations have been suspended almost 8 months one of the longest BC forestry strikes ever with 3000 workers off; mediators recently threw in the towel leaving the whole future in question. Dividend is almost certainly going to be cancelled with annual results next week.

The opportunity is that the company is liquid, very manageable debt, trading at a big discount with close to 150% upside based on the 5-6 year average; the strike will eventually get settled one way or another. Lumber prices are moving back up (OSB at 18 month high), US and Canadian housing markets are likely to be very strong over the next year. If they can get back to work, the stock can fly. But will they? The stock just hit another 52 week low so investors are about as pessimistic as you can be. I have been buying at $1.06-1.08 but waiting for more downside for a second buy on the dividend cut.


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## Borat (Apr 28, 2017)

Mediators were re-appointed after resigning with special powers to bring about an agreement after an eight month strike and announced today there is a tentative agreement subject to USW members approval. Stock jumped up on the news.


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## londoncalling (Sep 17, 2011)

Earnings released today just over an hour ago. I may top up my position today based on the news. Links for both the news of a tentative agreement and the earnings call in for those wanting to hear the conference call tomorrow.

https://web.tmxmoney.com/article.php?newsid=8003948735619689&qm_symbol=WEF

https://web.tmxmoney.com/article.php?newsid=5585822030316338&qm_symbol=WEF

Edit: Added to position today at @1.29. will trim if it returns to $2.XX range


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## Beaver101 (Nov 14, 2011)

All fingers crossed - hopefully only "good" news coming through (about time) on this one.


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## londoncalling (Sep 17, 2011)

I wasn't able to find the earnings report released today. will check again tomorrow after work. I did find this regarding the dividend.

https://www.globenewswire.com/news-...cord-Date-of-First-Quarter-2020-Dividend.html

"VANCOUVER, British Columbia, Feb. 11, 2020 (GLOBE NEWSWIRE) -- Western Forest Products Inc. (TSX: WEF) (“Western” or the “Company”) is pleased to confirm that a quarterly dividend of $0.0225 per share will be paid with respect to the Company’s first fiscal quarter of 2020 to shareholders of record as at the close of business on Friday, February 28, 2020 and payable on Friday, March 13, 2020.
The dividend will return a portion of the Company’s cash to shareholders, after taking into consideration the Company’s liquidity and ongoing capital needs. The Board of Directors will review the amount of the dividend on a quarterly basis. This dividend qualifies as an “eligible dividend” for Canadian income tax purposes."

For those that are unfamiliar with this stock the dividend remains unchanged.


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## doctrine (Sep 30, 2011)

Here's a link to the release: https://stockhouse.com/news/press-releases/2020/02/11/western-announces-fourth-quarter-2019-results

Earnings not great (loss $0.09/share), but I don't think unexpected. There is a lot of uncertainty but overall the market seems to be improving with pricing trending slightly up, due to significant reduction in supply while the Cdn and US housing markets are picking up.

No doubt they continued the dividend because the balance sheet is good, and net debt to capitalization is only 19%. They will have to ramp up their working capital a bit but they have more than enough room to do it with existing vehicles.

At $1.28, it's hard not to see the value here. This is a company that has the capacity to earn $70-80M/yr ($0.20+/share). Ratification votes are taking place Thursday and Friday. So operations might be starting back up next week. I'm sure a lot of investors have been bailing as the strike dragged on and are now waiting for the strike to be over and the annual report to get some certainty. The conference call is tomorrow morning and so I'm sure by the end of the day, the market will have indicated their vote.


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## londoncalling (Sep 17, 2011)

Thanks Doc for the link to the earnings and your analysis. I would say the earnings are in line with expectation as well and agree that there is value here longer term. I am hopefully the ratification vote will be successful and see the stock price return to it's previous range. In my opinion this company has always been well managed. I don't know how many companies could whether such a decline in revenue. If memory serves correct, I believe the company had a clean balance sheet and had initiated a conservative and stable dividend increase. Will watch with great anticipation the rest of the week. Curious if anybody has sold, initiated a position, trimmed, added or held since 2015.

Cheers


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## Eder (Feb 16, 2011)

I've got some I bought at ~$1.45...been clipping coupons since then. I have over the years bought at this level then sold when price reached $2.50 or so...has been a great swing trade but is less than 1% of my portfolio.


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## doctrine (Sep 30, 2011)

As I stated, I picked up shares at $1.06-1.08 range from last few weeks, it was just too compelling for all previously stated reasons. In addition, they bought back about 5% of the shares during the strike, and managed to get through the year with only slightly negative EBITDA.

Look at comparables - it's not just WEF. West Fraser Timber - up 8.9% today and at a 10 month high; OSB up 4.5% and at a 15 month high. Lumber prices are moving up on strong demand and housing growth. WEF will lag of course but if they were fully operating now, the share price would probably be in the $1.80-$2.00 range based on a P/E of 9-10. If lumber prices are stable or higher, and every industry report is forecasting higher prices, then it should get back there by the summer.

Just so rare to see a discount like this in the middle of a very positive outlook.


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## londoncalling (Sep 17, 2011)

https://www.westernforest.com/wp-content/uploads/2020/02/NR-Results-2020-Q1-FINAL.pdf


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## doctrine (Sep 30, 2011)

WEF was playing right out as I thought, lumber and housing markets were heating up and WEF was bumping up against $1.40 before the pandemic started and then boom, down over 55%. I held on and bought shares down at $0.65 where it was for the last 4-6 weeks. The CEO and directors were buying in the public market down to $0.60-$0.61 in March.

The Q report indicated all but 2 of their sawmills are back in action and woodland operations are underway. Lumber prices fell but are moving back up. I'm holding on for a while. I still think it gets back up to $1.3-$1.5 sooner rather than later, although probably a year or two until it sees $2+ again, but you never know.

They cancelled their dividend but they have relatively low debt, less than peers, which is where you want to be. I'm sure this company will be moving again soon.


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## MrMatt (Dec 21, 2011)

I have West Fraser, had for several years, the lumber companies appear very volaile.


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## londoncalling (Sep 17, 2011)

doctrine said:


> WEF was playing right out as I thought, lumber and housing markets were heating up and WEF was bumping up against $1.40 before the pandemic started and then boom, down over 55%. I held on and bought shares down at $0.65 where it was for the last 4-6 weeks. The CEO and directors were buying in the public market down to $0.60-$0.61 in March.
> 
> The Q report indicated all but 2 of their sawmills are back in action and woodland operations are underway. Lumber prices fell but are moving back up. I'm holding on for a while. I still think it gets back up to $1.3-$1.5 sooner rather than later, although probably a year or two until it sees $2+ again, but you never know.
> 
> They cancelled their dividend but they have relatively low debt, less than peers, which is where you want to be. I'm sure this company will be moving again soon.


Once again, thanks for the analysis Doc. I intend to hold as well till it returns to the $2+ range. I thought that with the low debt, insider buying and restarting operations post labour disruption they would may escape cutting and did not expect a complete suspension. I've always felt this has been a well managed company so I will have to defer to their judgement on this. Perhaps they plan to utilize the cash for something better.

I am beginning to think that many companies have taken note that the market seems to have shrugged off the pandemic effect on share price and that most investors are viewing dividend cuts and elimination as a prudent decision. Increases are not seen as being good for price. One example is AQN's increase has resulted in the share price moving lower. Definitely lots of volatility these days and earnings reports seem to be all over the place. today's unemployment numbers were pretty grim but nowhere near economists forecasts. Definitely taking it all in and trying to learn as much from it as I can.


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## MrMatt (Dec 21, 2011)

I think you're right, the pandemic is here, stocks fell.
Interest rates are at zero, so if you think the company will recover, just wait it out.

I'm glad equity markets seem to be relatively calm, particularly considering the massive jump in unemployment, and plummeting GDP.


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## Eder (Feb 16, 2011)

We are going to need all the sawmills we have to get the economy out of the morgue.


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## MrMatt (Dec 21, 2011)

Eder said:


> We are going to need all the sawmills we have to get the economy out of the morgue.


Don't worry, I bet handing out another few billion to stay home and not work won't slow down the recovery at all.


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## londoncalling (Sep 17, 2011)

Western Forest Products Inc. Reinstates Quarterly Dividend and Confirms Record Date of First Quarter 2021 Dividend (newswire.ca)


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## Eder (Feb 16, 2011)

I'm finally whole with my WEF. I'm out at $2.20. Otherwise I'm in forever.


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## doctrine (Sep 30, 2011)

I'm up quite a bit - as I stated upthread, I bought all the way down to $0.64 and they now closed at $1.61. I haven't sold anything and WEF is my largest position. 

Given they just reported record adjusted Q4 EBITDA (backing out the tax gain), which was by the way nearly record for any quarter, and in their seasonally weakest quarter, the outlook is very good. Give them a bit of a discount for some leftover legacy debt from the shutdown, and a fair value would be $2.25-$2.50, in the current market. By Q2, they will be in a significant surplus cash position, minus any growth in capital expenditures, acquisitions, or buybacks. If I had a 1 year outlook, it would be more like $2.50-$3.00. 

I would consider reducing my position in my target ranges, but it depends on when - by Q3, if the hot lumber markets continue as they are, my targets may increase.


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## Eder (Feb 16, 2011)

“Sawmills always makes me feel a little better about life.”


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## Beaver101 (Nov 14, 2011)

^ Good news all around with this little one. Nice.


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## robertsclak (Feb 22, 2021)

londoncalling said:


> I've had this one on my radar for the past while and was waiting for the Q3 results. I know another member on this board was buying back in 1.3X range. Curious to see what others thought of the results. Lots of commentary about safety and operational changes as well as a recap of the corporate restructuring. 17% increase in sales on less volume due to commodity price. EPS of .04 leaves a payout ratio of 50% seems reasonable. High free cash flow, a dividend and share buybacks are what drew my attention to this stock originally. Thoughts and insight appreciated.
> 
> http://web.tmxmoney.com/article.php?newsid=63648791&qm_symbol=WEF
> 
> Cheers


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## robertsclak (Feb 22, 2021)

Between the price of lumber and the strength of U.S. housing statistics ,this equity looks to have upside.


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## MrMatt (Dec 21, 2011)

I've been long for years on WFT, lumber is a surprisingly volitile industry.


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## robertsclak (Feb 22, 2021)

londoncalling said:


> I've had this one on my radar for the past while and was waiting for the Q3 results. I know another member on this board was buying back in 1.3X range. Curious to see what others thought of the results. Lots of commentary about safety and operational changes as well as a recap of the corporate restructuring. 17% increase in sales on less volume due to commodity price. EPS of .04 leaves a payout ratio of 50% seems reasonable. High free cash flow, a dividend and share buybacks are what drew my attention to this stock originally. Thoughts and insight appreciated.
> 
> http://web.tmxmoney.com/article.php?newsid=63648791&qm_symbol=WEF
> 
> Cheers


Wef has been a sleeper for about 2 yrs.It is waking up now.I had a sell target of $ 2.25.My target now is $3.25.Go figure that one out!!!


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## MrMatt (Dec 21, 2011)

robertsclak said:


> Wef has been a sleeper for about 2 yrs.It is waking up now.I had a sell target of $ 2.25.My target now is $3.25.Go figure that one out!!!


Yeah, lumber is very cyclical.


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## doctrine (Sep 30, 2011)

I'm holding my WEF shares still, bought from $1 down to $0.64. Lumber prices are up over 30% just in April. WEF will have a record Q1 and by my estimates will be net cash after being more than $100M in debt just 2 quarters ago. The CEO previously indicated he was comfortable at $60-80M of debt, so that shows you how much room they have to take action. About a month ago, they started buying back shares on their NCIB. I would not be surprised to see asset purchases, more share buybacks, and potentially a full restoration of the dividend, although major news not likely until after results on 5 May.

Given how much better the lumber market is than 2018 with a strong outlook, a fair value share price is in excess of $2.50 for sure. There is an easy argument for >$3. Some lumber companies like WFG and IFP are hitting all time highs, although they are more commodity exposed. WEF is just coming from such a low base, because of the strike etc, that it is taking time to get there. The buyback program will help a lot here.

Lumber is cyclical for sure, but it is still trading at a discount to the last decade when lumber prices were far lower and there were several cycles. Stocks are low, housing demand is insane. Imagine what happens if there are major forest fires again this summer.


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## MrMatt (Dec 21, 2011)

I have WFG (West Fraser, formerly WFT).

Looks like lumber is in a recent high, but I'm not sure this is the place to invest new money right now.


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## londoncalling (Sep 17, 2011)

there has been some discussion on WEF the past couples day in the What are you selling thread as I had trimmed my position on Tuesday. (5) What are you selling? | Page 4 | Canadian Money Forum 
Great too hear the optimism form other holders of lumber companies and WEF in particular. I look forward to further price appreciation. It will offset the hit to my pocket book for my next trip to the lumber yard. ;P


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## robertsclak (Feb 22, 2021)

londoncalling said:


> there has been some discussion on WEF the past couples day in the What are you selling thread as I had trimmed my position on Tuesday. (5) What are you selling? | Page 4 | Canadian Money Forum
> Great too hear the optimism form other holders of lumber companies and WEF in particular. I look forward to further price appreciation. It will offset the hit to my pocket book for my next trip to the lumber yard. ;P





londoncalling said:


> there has been some discussion on WEF the past couples day in the What are you selling thread as I had trimmed my position on Tuesday. (5) What are you selling? | Page 4 | Canadian Money Forum
> Great too hear the optimism form other holders of lumber companies and WEF in particular. I look forward to further price appreciation. It will offset the hit to my pocket book for my next trip to the lumber yard. ;P


Better be at lumber yard soonest as I hear they are having inventory problems.I am seriously overweight WEF,so I may be slightly optimistic.Live by the sword,die by the same.SC


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## londoncalling (Sep 17, 2011)

robertsclak said:


> Better be at lumber yard soonest as I hear they are having inventory problems.I am seriously overweight WEF,so I may be slightly optimistic.Live by the sword,die by the same.SC


Absolutely, Even if we can overcome the inventory and supply chain issues I am doubtful prices will follow suit lock step. As a consumer bad. As an investor good.


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## Eder (Feb 16, 2011)

WEF is cyclical so its best not to risk being a bag holder.


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## doctrine (Sep 30, 2011)

Eder said:


> WEF is cyclical so its best not to risk being a bag holder.


This is very true. But I think even today I would put new money in this sector. The stocks are way behind the commodity. Like seeing gold go to $4000/oz, but gold miners still trading 30-40% below when gold spiked to $2000/oz. Except that the companies have no debt, little capital expense, and have plenty of room for buybacks, dividends, or acquisitions - likely a combination of all 3 in WEF's case. And no relief in sight - Canada's lumber production is solidly down in the last 5 years and may never return to previous highs again.

For target prices, given that commodity lumber prices are more than double 2018, and specialty lumber prices are also up 20-40% at least, WEF should be measured against its 2018 high of $2.95 a share when lumber prices were much lower and housing not nearly as hot. Closed last week at $2.10.


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## Eder (Feb 16, 2011)

If the silly duty on lumber gets removed for the 12th time the event would be a huge catalyst for the sector. Biden seems as protectionist as Trump though....I'd not hold my breath.


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## robertsclak (Feb 22, 2021)

doctrine said:


> This is very true. But I think even today I would put new money in this sector. The stocks are way behind the commodity. Like seeing gold go to $4000/oz, but gold miners still trading 30-40% below when gold spiked to $2000/oz. Except that the companies have no debt, little capital expense, and have plenty of room for buybacks, dividends, or acquisitions - likely a combination of all 3 in WEF's case. And no relief in sight - Canada's lumber production is solidly down in the last 5 years and may never return to previous highs again.
> 
> For target prices, given that commodity lumber prices are more than double 2018, and specialty lumber prices are also up 20-40% at least, WEF should be measured against its 2018 high of $2.95 a share when lumber prices were much lower and housing not nearly as hot. Closed last week at $2.10.


When the 1st quarter numbers come out this sector will be very interesting!!


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## londoncalling (Sep 17, 2011)

A 325% surge in lumber prices over the past year has pushed new-home prices up by $24,000 apiece (msn.com)


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## londoncalling (Sep 17, 2011)

Western Announces First Quarter 2021 Results (tmx.com)


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## Eder (Feb 16, 2011)

I was all out at $2.20 but glad to see a decent quarter.


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## james4beach (Nov 15, 2012)

People are now poaching trees in British Columbia. I saw a story about a forest reserve with missing trees... someone sneaked in and logged them. The wood is so valuable!


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## doctrine (Sep 30, 2011)

Record results. Debt free at quarter end, but with a big asset sale and another month of sales, they are probably $35-40M net cash right now. They are taking the route of share buybacks, with 3.8M bought so far, or $7.5M in the last 6-7 weeks. But the cash is building up. The buybacks are really going to start to make a difference - the stock price has been pushed up from $1.73 to $2.29 since they began. Still holding - debt free, huge cash blow, relatively undervalued compared to 2018 high of $2.95, and active share buybacks of 10-20% of daily volume. Price is going to $3 at some point for sure in my opinion - it could be there today even if if lumber prices fell 50%.

Lumber prices rose 50% in April alone - forestry stocks are cyclical and all that, but they are mostly flatish as perhaps investors are being cautious. This is why buybacks matter - the money will talk. And WEF has been redirecting a lot of inventory into these high prices.


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## robertsclak (Feb 22, 2021)

doctrine said:


> Record results. Debt free at quarter end, but with a big asset sale and another month of sales, they are probably $35-40M net cash right now. They are taking the route of share buybacks, with 3.8M bought so far, or $7.5M in the last 6-7 weeks. But the cash is building up. The buybacks are really going to start to make a difference - the stock price has been pushed up from $1.73 to $2.29 since they began. Still holding - debt free, huge cash blow, relatively undervalued compared to 2018 high of $2.95, and active share buybacks of 10-20% of daily volume. Price is going to $3 at some point for sure in my opinion - it could be there today even if if lumber prices fell 50%.
> 
> Lumber prices rose 50% in April alone - forestry stocks are cyclical and all that, but they are mostly flatish as perhaps investors are being cautious. This is why buybacks matter - the money will talk. And WEF has been redirecting a lot of inventory into these high prices.


Quarterly results are very good!! I was expecting divvy to be back to 8 cents per share annually at a minimum. I am disappointed.


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## doctrine (Sep 30, 2011)

robertsclak said:


> Quarterly results are very good!! I was expecting divvy to be back to 8 cents per share annually at a minimum. I am disappointed.


There may be something to say on the conference call, but if they are actively pumping that money into buybacks, given where the stock price is and has been lagging peers who either have no dividend (Canfor, Interfor, Resolute) or far smaller yields (WFG 0.7% vs 1.7% WEF), then it makes sense to me that they are not too reactionary with the dividend policy quarter to quarter.


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## nobleea (Oct 11, 2013)

WEF down 10% today. 1 month low. a bit odd.


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## Ricehammer4416 (Jan 6, 2021)

nobleea said:


> WEF down 10% today. 1 month low. a bit odd.


Very odd. It triggered a stop loss for me, so I sold everything that I had left (sold some on the way up). 

Debating whether to get back in. I was originally planning to hold until end of Q2 at hopefully around 3.


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## londoncalling (Sep 17, 2011)

Ricehammer4416 said:


> Very odd. It triggered a stop loss for me, so I sold everything that I had left (sold some on the way up).
> 
> Debating whether to get back in. I was originally planning to hold until end of Q2 at hopefully around 3.


I believe lumber futures have been in steady decline the past 6 days. This shouldn't affect retail lumber prices till fall but as share price is supposed to be based on future performance I can see the reason for a pullback. Still holding. I haven't looked and may not get a chance but I wonder how others in the space fared today.


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## robertsclak (Feb 22, 2021)

doctrine said:


> There may be something to say on the conference call, but if they are actively pumping that money into buybacks, given where the stock price is and has been lagging peers who either have no dividend (Canfor, Interfor, Resolute) or far smaller yields (WFG 0.7% vs 1.7% WEF), then it makes sense to me that they are not too reactionary with the dividend policy quarter to quarter.





londoncalling said:


> I believe lumber futures have been in steady decline the past 6 days. This shouldn't affect retail lumber prices till fall but as share price is supposed to be based on future performance I can see the reason for a pullback. Still holding. I haven't looked and may not get a chance but I wonder how others in the space fared today.


I am severely over weight WEF and holding on looking for 3$ plus.


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## Ricehammer4416 (Jan 6, 2021)

robertsclak said:


> I am severely over weight WEF and holding on looking for 3$ plus.


That was my original target as well, but I'm glad my stop loss kicked in yesterday. I said to myself if it drops to $2 I may get back in, but I fully expected a rebound today not a further drop. 

I might take a small position again. The fundamentals for the company haven't changed much.


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## doctrine (Sep 30, 2011)

Lumber prices are extremely volatile. Record increase/overbought immediately followed by near-record decrease/overselling. Now futures are limiting up again two days in a row across the board.

Underlying conditions haven't changed and most lumber companies are a buy, imo. They aren't pricing in anything resembling current prices so WFP, CFP, WEF, IFP in particular are debt free, or nearly debt free, cash printing machines. There are zero stockpiles of lumber anywhere. And what I believe is happening now is the NA demand is sucking supply from Europe and Asia and prices are starting to rise there because underlying demand is also there. Industry was balking at the $1700 prices but the game of chicken in holding off drove prices to $1200 which have bounced hard. Companies like WFP/CFP/WEF/IFP are not pricing in anything near even to $1000 lumber. Maybe $600-700.

I am doing estimates of what I think a fair value is and I really think the conversation doesn't start until we hit 2 times book value. That would be about $3. That would also be about the 2018 high, and conditions are so favourable it is not clear to me why the stock prices of these companies shouldn't be above the 2018 level.


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## robertsclak (Feb 22, 2021)

doctrine said:


> Lumber prices are extremely volatile. Record increase/overbought immediately followed by near-record decrease/overselling. Now futures are limiting up again two days in a row across the board.
> 
> Underlying conditions haven't changed and most lumber companies are a buy, imo. They aren't pricing in anything resembling current prices so WFP, CFP, WEF, IFP in particular are debt free, or nearly debt free, cash printing machines. There are zero stockpiles of lumber anywhere. And what I believe is happening now is the NA demand is sucking supply from Europe and Asia and prices are starting to rise there because underlying demand is also there. Industry was balking at the $1700 prices but the game of chicken in holding off drove prices to $1200 which have bounced hard. Companies like WFP/CFP/WEF/IFP are not pricing in anything near even to $1000 lumber. Maybe $600-700.
> 
> I am doing estimates of what I think a fair value is and I really think the conversation doesn't start until we hit 2 times book value. That would be about $3. That would also be about the 2018 high, and conditions are so favourable it is not clear to me why the stock prices of these companies shouldn't be above the 2018 level.


.
I agree with Doctrine.Conditions have never been this favorable for the forestry sector yet the companies share prices are well behind all time highs,well behind!!


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## nobleea (Oct 11, 2013)

This isn't going to be like gold and silver stocks? Which show a correlation to the underlying commodity price, but not as much as you would expect or hope for, due to the cyclical nature/


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## nobleea (Oct 11, 2013)

WEF has been approved to buy and cancel an additional 4.3M shares on the open market over the next 2 months. Looks like they have about 9M shares to go.

They have been purchasing at an average price of 2.05 which means that they did most of their purchasing in the last 2 months (when they had lots of FCF) and that they think that price and under is a good deal or under-represents the value of the company.

Lumber prices have retraced a fair amount in the last month, but they're still printing money. Q2 is usually really strong and this should line up well with the purchase and cancellation of some shares to have likely a record EPS of I'd guess 0.25/share. Will that be enough to boost the share price in a notoriously cyclical industry?


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## nobleea (Oct 11, 2013)

Nope. The 1 month chart on this one is not looking good. P/E at a ridiculous 3.2, but that's probably based on record lumber prices.
I don't have any more of this.


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## Eder (Feb 16, 2011)

I'm back in at when it hits $1.40....(maybe in May}...rinse & repeat.


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## doctrine (Sep 30, 2011)

I'm out, obviously I would say, because of the crazy interference by the BC Govt. But then again, I was buying shares at like 60 cents, so I took a nice profit above $2, even if I would have rathered taken it at $3. I would be back in once either once there is sufficient value to take a chance, or there is more certainty on what their run-rate revenue would be. $0.43 cents a share in cash plus another $1.40 for the business - take 30-40% off the business with their cash pile and you are at the $1.40 that Eder refers to. Stocks always overreact so a real downside would be say 2 mills closing and 50% of book value meaning closer to $1.10, provided they hold their cash which I suspect they will given the uncertainty.


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## londoncalling (Sep 17, 2011)

WEF considerably outperformed other Canadian lumber stocks(WFT,CFF, IFP, ADN) on a 1 yr basis but has seen significant decline looking at 6 month and more recent. Lumber is ending it's period of seasonal strength so I plan to exit and reevaluate. I would strongly reconsider buying back below $1.30 but that final decision would be made based on a deeper analysis at the time. Any insight as to how inflationary pressure will affect lumber prices going forward for WEF and lumber in general?


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## Beaver101 (Nov 14, 2011)

Still holding this one as it ain't broken, no need to fix it.


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## londoncalling (Sep 17, 2011)

Beaver101 said:


> Still holding this one as it ain't broken, no need to fix it.


I will likely buy back in come spring. This one is a trader not a buy and holder. If it goes back to $2.50 in the mean time I will fill find another home for this one.


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## Beaver101 (Nov 14, 2011)

londoncalling said:


> I will likely buy back in come spring. *This one is a trader not a buy and holder. * If it goes back to $2.50 in the mean time I will fill find another home for this one.


 ... don't dispute that given it's a micro-cap which is meant for that.

But I have been holding this one since mid-2013 with ACB of $1.69 and the price has gyrated inbetween, up and down, down and up. Besides, if I were to sell, I haven't figured out what to replace it with (I'm lazy) and the fact it was (is still?) on DRIPs.

Call me a contrarian here so each to their own.


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## londoncalling (Sep 17, 2011)

I have added and trimmed this one since 2013 when I started this thread. This is the first time I have completely exited. I think this stock will continue to bounce around for quite some time. I wish I had been more brave and added when it was below a buck last fall. Unfortunately, I added at a higher price of around $1.30. I prefer to get a yield north of 3% with my investments but have taken lower yield for higher dividend growth in the quest for the best overall total return. I will continue to watch this one. I haven't found a place to reallocate but am content to hold cash for now. Not sure if there will be much of a tax loss harvest sale this year with the market doing so well in 2021.


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## londoncalling (Sep 17, 2011)

Western Forest Products Inc. Increases Dividend (tmx.com)


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## doctrine (Sep 30, 2011)

WEF is hanging on there, but if I was in the space, I would look at WFG or IFP. They are arguably both cheaper (especially WFG) and more diversified and now 25% or less exposure to BC, as opposed to 80%+. WFG is finishing up it's second 10% SIB buyback in the last 9 months - 20% of the company, _poof_, while maintaining net cash! It had $13 Cdn/share EPS last quarter on a $116 stock price, almost 1/2 the valuation of WEF.


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## londoncalling (Sep 17, 2011)

I haven't ventured back into the lumber stocks yet as I was waiting to see the impact of rate hikes on new home construction starts. Not sure if everybody finished all their renovations, remodels and deck building for awhile during the pandemic.


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## londoncalling (Sep 17, 2011)

As we head into fall I thought I would take a moment to revisit lumber stocks. Lumber prices(the commodity) aren't looking good, as expected, due to interest rates, recession fears and mass renovations. Home sales are stalling, and future development looks bleak. Have put WEF, WFG, CFP, and IFP back on my watchlist.


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## londoncalling (Sep 17, 2011)

Canadian billionaire Jimmy Pattison would boost stake in lumber companies if 'the price was right' - BNN Bloomberg 

Any guesses as to what deals Jimmy has in the works?


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## doctrine (Sep 30, 2011)

Maybe Jimmy will take another run at Canfor at $16 a share. That offer was voted down, and a lot of people said 'oh look, thank goodness because the price went to almost $35 after'... but here we are back down at $19. 

Long term it is an attractive industry. My preferred pick remains WFG and maybe IFP. They are probably fair value here but I would be more interested if there were a few more mill closures - at current relatively low lumber prices, there is certainly some uneconomic production, and a little bit of pain would push a few more mills to close, which makes it all that much more attractive if there is another run up in demand.

I also like the debt free status of the companies - they are well run and simply aren't going bankrupt because there isn't any debt - someone else will go bankrupt first. And they have a good habit of returning the excess cash in big buybacks and special dividends.


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