The Zacks-ranked construction products industry has performed exceptionally well over the past year, growing 31.6%. This is nearly double the S&P 500, which rose 18.0%.
What drove these stocks to crazy heights? And will it continue, or will there be a setback later this year? And in either case, is it a good time to buy stocks? Let’s find out.
The main reason these stocks are skyrocketing is the high price of lumber. And this has happened because of a number of things happening at the same time.
First, 2020 started off with low inventories due to issues in Canada’s supply chain.
And then there were the wildfires in the west in August and September and the hurricane season in the southeast, all of which disrupted production.
And then we had the pandemic, which in addition to disrupting production, also forced people to stay indoors, resulting in a boom in repairs / renovations. While there was a shortage of logs and all kinds of treated lumber, many people were building decks. Others were looking for a bigger house, or decided to finally move in, or simply take advantage of low mortgage rates. Which of course meant a boom in housing construction.
This situation has not materially changed in the new year. Lumber prices therefore remain high and, given the stock situation, are expected to remain so. While there may be pullbacks at times, the tight inventory situation and the strength of the housing market generally mean that prices will remain high.
But of course, they cannot go higher indefinitely. The very high prices are already putting homes out of reach for some. The $ 15,000 credit proposed by the new administration for first-time buyers could help this spring, however.
As it stands, we seem to be looking at relatively strong pricing with volumes leveling off over the year, meaning there is still room for improvement here.
And you are also spoiled for choice as there are a large number of stocks rated Zacks # 1 (strong buy) and # 2 (buy) that can generate these short-term gains.
These would be ranked # 1 BSF Norbord inc., which offers wood panels in the United States, Europe and Canada; Potlatch Corp. PCH, which is a real estate investment trust (REIT) with woodlands in Alabama, Arkansas, Idaho, Minnesota and Mississippi; and Weyerhaeuser Company WY, which is a large-scale supplier of logs, hardwoods, lumber, poles and plywood, as well as minerals, oil, gas, seeds and seedlings to worldwide.
Some of the # 2 ranked stocks include LouisianaPacific Corp. LPX, which is a leading manufacturer of quality, durable engineered wood building materials, framing and siding products for residential, industrial and light commercial construction; Boise Cascade, LLC BCC, which manufactures engineered wood products, plywood, lumber and particle board and distributes decks, EWP, lumber, panels, particle board, MDF products, etc. in the United States and Canada; and Masonite International Corporation DOOR, which designs and manufactures interior and exterior doors.
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Weyerhaeuser Company (WY): Free Inventory Analysis Report
LouisianaPacific Corporation (LPX): Free Stock Analysis Report
Potlatch Corporation (PCH): Free Inventory Analysis Report
Masonite International Corporation (DOOR): Free Stock Analysis Report
Boise Cascade, LLC (BCC): Free Stock Analysis Report
Norbord Inc. (OSB): Free Stock Analysis Report
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