Seeking Alpha: Improving Housing And A Major Deal Make Louisiana-Pacific Much More Interesting

The housing recovery trade seems to have hit a bit of a snag recently, as even hot trades like Home Depot (HD) and Mohawk (MHK) have cooled a bit recently. With mortgage rates heading higher and new construction activity still not that strong relatively to long-term averages, timber, lumber, and wood products companies have gotten dinged. While I had already been planning to write on Louisiana-Pacific (LPX) and point out that it seemed as though the market was pricing in too much skepticism about the OSB, siding, and engineered wood markets, the company did a deal that only makes the story more interesting.

In buying Canada's Ainsworth Lumber (ANSBF.OB), Louisiana-Pacific is not only adding capacity ahead of increased demand, but it is also improving its sales/margin mix, adding an Asian export business, and perhaps helping to quell fears that the industry will act irresponsibly with respect to capacity restarts/additions. While I'm actually surprised at how undervalued Louisiana-Pacific appears to be, it looks like there could be room here for 20% to 40% appreciation even after the strong positive reaction to the Ainsworth deal.

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Improving Housing And A Major Deal Make Louisiana-Pacific Much More Interesting