When it comes to investing in Canada’s timber and lumber sector, it sometimes can be hard to tell the forest from the trees.
Today, lumber prices are soaring, having peaked in early September at nearly US$955 per thousand board feet, a record high and about 82 per cent above the previous peak in 2018, according to Random Lengths, which looks at a basket of different varieties across North America.
tap here to see other videos from our team.
Analysts say the outlook for lumber remains bright, as low-interest rates and a surging housing market across North America ensure strong demand going into 2021. But even as high lumber prices translate into rich cash flow for lumber companies across Canada, investors remain skittish.
“We’re bullish on all the companies, right now,” said Paul Quinn, an analyst at RBC Securities who covers the forestry sector. “Usually companies’ (share prices) move in lockstep with commodity price … if you had prices at this level in 2018, the share prices would be double what they are right now, but they’re not because investors are worried.”