Slow and steady may win the race, but it doesn't do a lot for stock
valuations. The U.S. residential construction market has been improving,
but you really wouldn't know that from looking at the performance of
housing-related names like Mohawk (NYSE:MHK) and Armstrong (NYSE:AWI). Likewise, building material companies like Louisiana-Pacific (NYSE:LPX), Weyerhaeuser (NYSE:WY), Boise Cascade (NYSE:BCC) and Norbord (OTCPK:NBRXF) have been pretty weak since the middle of 2015.
I think Louisiana-Pacific remains what it has been for some time - a
trading vehicle for playing market sentiment about the housing market.
Housing starts could approach (or reach) 1.25M this year, and OSB
pricing (North Central) has strengthened relative to last year. With no
real OSB capacity additions on the way in 2016, industry utilization
could move into the high 80%'s and that should be good for the sector.
Likewise, LP is gaining traction with its SmartSide siding and
views this as a growth opportunity. I have very little confidence in
these shares as a long-term holding, but the shares should probably be
trading in the high teens and could go into the $20s on more enthusiasm
around the space.
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Louisiana-Pacific Cleared For Take-Off, But The Flight Will Be Bumpy
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