IFP top inflation play for 2022
Looks like the market is finally starting to cotton onto the "higher for longer" or maybe "higher forever" lumber thesis.
John slam-Duncanson at Corton deserves credit - he called a return to $1000 lumber back in the summer when things were looking grim.
Check his bnn video from previous poster. Very clear the street still out to lunch on lumber. My take on what hes said is basically that major structural changes to industry make the already-compelling thesis even more so:
- Consolidaion allows major, geographically dispersed players to better manage supply during price weakness (so higher average pricing will be result) top 25 now 65% vs 50% 10 yrs ago. Top 10 : 40%
- permanent 1 to 1.5 Bbf decline in supply from BC = what is coming on in US south in next 2 yrs. Market hasnt figured this out
His price forecast for 2022: $965 vs a year ago said $725 for 2021. Actual 2021 average was about $870, so his estimate prooved conservative as this was 20% higher.
Meanwhile analyst consensus is only $586 for 2022 vs $455 for 2021 (a year ago).
Based on my crude model, if lumber average is $965 for 2022, then IFP should earn over C$20/shr net.
The average p/e of the S&P 500 is 30. $20/shr * 30 = a $600 price target for IFP assuming it only gets the average p/e of 30.