After a tough decade, things have at last turned up for lumber company West Fraser (OTCPK:WFTBF) (WFT.TO) and its peers. Operating rates in North American have been in the vicinity of 90% and housing starts have been slowly grinding higher. What's more, the company's own constant focus on costs and self-improvement has positioned it to make the most of the upturn in demand.
The "but" is the uncertainty regarding trade policy between the U.S. and Canada. West Fraser is a Canadian company, and while it produces about 40% of its lumber in the U.S., that leaves another 60% vulnerable to potential tariffs. My base case is that the outcome of this trade dispute is not crippling to West Fraser, Canfor (OTC:CFPUF) (CFP.TO), or Interfor (OTC:IFSPF) (IFP.TO) (nor unfair to Weyerhaeuser (NYSE:WY)), and that West Fraser's shares are currently priced at a bit of a discount on the assumption that there's a continuing build toward 1.6M to 2.0M housing starts in 2019/2020.
While West Fraser's ADRs do have the dreaded "F," they do offer some liquidity. The Canadian shares are far more liquid, though, and most brokers facilitate trading on Canadian exchanges without too much difficulty.
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West Fraser Sandwiched Between Healthy Markets And Trade Policy Uncertainties