OSB Prices Booming, But Louisiana-Pacific Shares Aren't Following

I thought Louisiana-Pacific (LPX) (or “LP”) shares were trading more or less near fair value when I wrote on the company earlier this year, and the shares have risen about 5% since then - slightly better than the iShares US Home Construction ETF (ITB), but lagging both Weyerhaeuser (WY) and Nordbord (OSB) over that time. The price of LP’s primary product, oriented strand board (or OSB) has continued to shoot higher amid healthy residential construction and restrained capacity/supply additions, though, and LP still has meaningful leverage to higher prices.

Residential construction is probably the most powerful potential driver at this point, as activity is trending a little higher than LP’s base-case assumptions. Although I do believe higher prices will eventually bring more supply into the market, I won’t dismiss the upside potential of a “stronger for longer” cycle. Still, LP operates in a cyclical business and I’d be careful about making big bets on “it’s different this time”.

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OSB Prices Booming, But Louisiana-Pacific Shares Aren't Following