IFP - Interfor

[Viking]

Spec, yes, lumber futures have been coming down pretty steadily since hitting the May high and lumber stocks are selling off again today. Lumber prices are still crazy high (historically speaking). It is impossible to know how far lumber prices will ultimately fall (given the challenges understanding the timing of covid impacts) but they could move much lower. If so lumber stocks will continue to sell off. And volatility in this sector is extreme so the price moves typically are fast and furious (not for the faint of heart). 

I continue to believe there is a fundamental supply demand imbalance and the floor price in this cycle will be higher than past cycles (and perhaps much higher). Housing starts at or above 1.6 million is the key. We will see how this plays out over the next year  

PS: i did exit my position today; i reduced it when IFP announced the acquisition. If lumber futures continue lower then my guess is forestry stocks will continue to sell off. Lost a little; learned a lot. Tuition. 

Edited June 2, 2021 by Viking

[Spekulatius]

I know it's simplified, but  IFP is essentially trading with the lumber futures, at least directionally:

 

We are also seeing that both charts have diverged starting in 2020 as the lumber futures have risen much more than IFP itself. This makes sense because lumber futures are short term bet while IFP buy nature is  long term bet.

 

So you should by IFP:

1) if IFP reduces the duration of the bet by paying special dividends ( thesis busted by the acquisition).

2) lumber futures stabilize or start to rise again while the gap between IFP's price and lumber futures prices persists.

 

 

It seems to me that betting against the prevailing trend (which is down) in lumber futures is a losing proposition if you are trading IFP. Maybe there is a way to hedge with a put on lumber futures and going long IFP.

Edited June 2, 2021 by Spekulatius