I have been waiting for the right time to get back into lumber stocks. I owned a number of the companies in 2010 and early 2011 but I sold too soon and missed the big moves in names like Western Forest Products, International Forest Products and West Fraser Timber. Since then I have been reluctant to start a position without a significant correction in the stocks first because I know that these companies are extremely volatile and will go into big corrections on the first whiff of macro-worries (because of their cyclical dependence on economic growth and the thin line separating over and under supply).
So I’ve waited and waited and was beginning to think that a correction would never come, but in the last couple of months the price of lumber came off significantly and so have some of the stocks. While the tree-cutting plays, like Western Forest Products and West Fraser, haven’t sold off enough to entice me in, the milling and manufacturing companies have seen bigger corrections.
So I took a position in Ainsworth Lumber. I tweeted the following last Friday: