10 best timber stocks to invest in

In this article, we will discuss the top 10 lumber stocks to invest in. If you want to explore similar stocks, you can also check out 5 Best Timber Stocks to Invest In.

Home prices explode in 2022 amid soaring inflation, higher interest rates and rising mortgage rates. Expensive borrowing hurt home buyers and weakened consumer demand for housing. With mortgage rates approaching 7%, lumber prices are falling and could be at or near lows. As of October 7, lumber is trading at $445 per 1,000 board feet and is down about 60% year-to-date.

Housing starts rose unexpectedly in August

On September 20, Reuters reported that the construction of new residential homes in the United States increased in August. Housing starts, a measure of new residential construction, rose 12.2% month-over-month to 1.58 million units in August, well above the market consensus that s stood at 1.44 million units. Housing starts for multi-family housing projects jumped 28.6% month over month in August, boosted by strong demand for rental apartments due to rising mortgage lending which reduces the power of housing. purchase of potential buyers. Single-family housing starts rose in August to 935,000 units and were up 3.4% month-over-month.

Growing demand for multi-family housing projects is driving activity in the volatile commodity market. Lumber futures have gained around 5% in the last five days to October 7. Investors looking to take advantage of the current housing situation can position their portfolios for a rebound. Lumber prices are closely tied to the housing market and while the housing sector is under pressure from rising interest and mortgage rates, rising housing starts multi-family dwellings can drive up lumber prices. Investors can take advantage while lumber is still cheap by buying some of the major softwood lumber stocks right now. Some of the top lumber stocks with positive market sentiment include UFP Industries, Inc. (NASDAQ:UFPI), Boise Cascade Company (NYSE:BCC), and Weyerhaeuser Company (NYSE:WY).

Photo by René Schubert on Unsplash

Our Methodology

To determine the best lumber stocks to buy now, we reviewed the lumber industry and identified the major players. We narrowed our selection to profitable companies with strong balance sheets and strong free cash flow. We gave weight to analyst and investor sentiment and included stocks with positive market sentiment. With each stock, we’ve mentioned hedge fund sentiment, analyst ratings and key features that rank it among the best timber stocks to buy right now. We’ve ranked these stocks based on their popularity among elite hedge funds.

Best Timber Stocks to Invest In

10. Stella-Jones Inc. (OTC: STLJF)

Number of Hedge Fund Holders: N/A

Stella-Jones Inc. (OTC: STLJF) is a major North American producer of wood products. On September 15, Stella-Jones Inc. (OTC: STLJF) announced that it would acquire Texas Electric’s wooden utility pole manufacturing business for $28 million along with $4 million in inventory. The transaction is expected to close by the end of 2022. The stock is one of the best lumber stocks to invest in right now.

On August 10, Stella-Jones Inc. (OTC: STLJF) announced its results for the second quarter of 2022. The company reported earnings per share of $1.51 and generated revenue of $907 million, exceeding Wall Street estimates of $238.39 million. As of October 7, the stock is trading at a PE multiple of 13x and offers a forward dividend yield of 2.03%. The company has free cash flow of $235 million and is one of the best cash-rich lumber stocks to buy right now.

Wall Street analysts are bullish on Stella-Jones Inc. (OTC:STLJF). On August 11, TD Securities analyst Michael Tupholme raised his price target on Stella-Jones Inc. (OTC:STLJF) to C$48 from C$45 and maintained a buy rating on the stock. On September 16, Scotiabank analyst Mark Neville raised his price target on Stella-Jones Inc. (OTC:STLJF) from C$50 to C$51 and reiterated a buy-side outperformance rating on the actions.

Some of the best undervalued lumber stocks to buy now include Stella-Jones Inc. (OTC:STLJF), UFP Industries, Inc. (NASDAQ:UFPI), Boise Cascade Company (NYSE:BCC) and Weyerhaeuser Company (NYSE:WY) .

9. Interfor Corporation (OTC:IFSPF)

Number of Hedge Fund Holders: N/A

Interfor Corporation (OTC:IFSPF) produces and sells wood products in Canada, the United States, Japan, China, Taiwan and in international markets. The company offers lumber, logs, wood chips and other residues. On Oct. 4, Scotiabank analyst Benoit Laprade revised his price target on Interfor Corporation (OTC:IFSPF) to C$42 from C$43 and reiterated a buy-side outperformance rating on the stock.

On October 3, Interfor Corporation (OTC:IFSPF) announced that it would acquire a 100% stake in Chaleur Forest Products for C$325 million. Chaleur Forest Products operates two sawmills that have a combined annual lumber production capacity of 350 million board feet. The acquisition is expected to be finalized in the fourth quarter of 2022.

Interfor Corporation (OTC:IFSPF) is cash-rich and profitable. The company had year-over-year cash flow of $734.6 million and an operating margin of 28.4%. Over the past three months, the stock has received 3 buy ratings and 1 hold rating from Wall Street analysts and has a strong buy consensus rating. Interfor Corporation (OTC:IFSPF) is one of the best lumber stocks to buy right now.

8. West Fraser Timber Co. Ltd. (NYSE:WFG)

Number of hedge fund holders: 14

West Fraser Timber Co. Ltd. (NYSE: WFG) is a diversified wood products company that manufactures and distributes lumber, engineered wood products, pulp, newsprint, wood chips and other residues. At the end of the second quarter of 2022, 14 hedge funds held stakes in West Fraser Timber Co. Ltd. (NYSE:WFG). The total value of these interests was $230 million.

In July, TD Securities analyst Sean Steuart raised his price target on West Fraser Timber Co. Ltd. (NYSE:WFG) at $120 from $105 and reiterated a buy rating on the stock. Over the past three months, West Fraser Timber Co. Ltd. (NYSE: WFG) received 3 buy ratings from Wall Street analysts and received a strong buy consensus rating. The stock has an average price target of $102, which is up 42%. West Fraser Timber Co. Ltd. (NYSE:WFG) is one of the best lumber stocks to buy right now.

On September 7, West Fraser Timber Co. Ltd. (NYSE: WFG) declared a quarterly cash dividend of $0.30 per common share of the company. The dividend was payable Oct. 7 to investors of record at the close of business Sept. 22. As of October 7, the stock offers a forward dividend yield of 1.67% and free cash flow of $2.14 billion.

As of June 30, Waratah Capital Advisors is the largest shareholder of West Fraser Timber Co. Ltd. (NYSE: WFG) and owns approximately 0.73 million shares of the company. The fund’s holdings are valued at $56.6 million and the investment covers 1.24% of its 13F portfolio.

7. Resolute Forest Products Inc (NYSE: DP)

Number of hedge fund holders: 16

Resolute Forest Products Inc. (NYSE: RFP) operates in the forest products industry in the United States, Canada, Mexico and international markets. The company has four business divisions: Market Pulp, Tissue Paper, Wood Products and Paper. As of October 7, Resolute Forest Products Inc. (NYSE: RFP) has gained 46.5% over the past twelve months and is one of the best lumber stocks to buy right now.

Resolute Forest Products Inc. (NYSE: RFP) is trading at a premium and has strong free cash flow. As of October 7, Resolute Forest Products Inc. (NYSE: RFP) had a year-over-year PE ratio of 3.78 and free cash flow of $499 million.

Last August, TD Securities analyst Sean Steuart revised his rating on Resolute Forest Products Inc (NYSE:RFP) to Tender from Hold and reiterated his $23 price target on the stock. The stock has a consensus buy rating among analysts.

At the end of the second quarter of 2022, 16 hedge funds held stakes in Resolute Forest Products Inc (NYSE: RFP). The total value of these interests was $478.78 million. As of June 30, Fairfax Financial Holdings owned more than 30.5 million shares of Resolute Forest Products Inc (NYSE: RFP) and was the company’s largest shareholder. The fund’s holdings are valued at $389.79 million and the investment covers 13.73% of its investment portfolio.

6. Rayonier Inc. (NYSE: RYN)

Number of hedge fund holders: 17

Rayonier Inc. (NYSE: RYN) is a specialty REIT that manages lumber and timber-rich assets. On Aug. 3, Rayonier Inc. (NYSE:RYN) announced above-market earnings for the second quarter of 2022. The company reported earnings per share of $0.22 and topped estimates by $0.06. The company generated $246.3 million in revenue and beat the Wall Street consensus of $30.79 million.

Rayonier Inc. (NYSE: RYN) pays dividends and is cash-rich and profitable. As of October 7, the stock offers a forward dividend yield of 3.62% and the company has free cash flow of $104.48 million and a year-over-year operating margin of 20.8 %. Rayonier Inc. (NYSE: RYN) is one of the best lumber stocks to buy right now.

At the end of the second quarter of 2022, 17 hedge funds were long Rayonier Inc. (NYSE: RYN) and held stakes worth $250.28 million in the company. As of June 30, Impax Asset Management is the largest shareholder of Rayonier Inc. (NYSE: RYN) and holds stakes worth $172.9 million in the company.

For investors looking for lumber stocks, some of the best pure lumber stocks to invest in right now include UFP Industries, Inc. (NASDAQ:UFPI), Boise Cascade Company (NYSE:BCC ) and Weyerhaeuser Company (NYSE: WY).

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Disclosure: none. 10 best timber stocks to invest in is originally published on Insider Monkey.

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