RJ's Target. Comparison w/ Weyerhaeuser. That scary $145/sh.Here's a link to the target vs/ actual summary for RJ. Arrows are mine denoting "near misses" where he was so far under-targeted he got embarrassed. Darry had three consecutive times in Q2/Q3 where the price smashed though his target. He had another near miss, and both upgraded frantically and also was saved by the BAM sale and consolidation period.
https://pasteboard.co/JWrnXpO.png
I'm amazed at the tepid activity so far given how transformational this state is. This is going to go GameStop but sustainably.
My take is some thinking outside the box is helpful. There will be unusual options available to them which may have a large impact on pricing, from the perspective of what matters in valuation. One case? Cutting the count in half in just a few years. Another case? A new peer group. Did you know you're poised to beat Weyerhaeuser like a rented mule in 2021 in terms of USD cash earnings?
The WY thing is compelling. I only have it back of napkin and will write a blog post or article soon I hope. WY is a $27B company that's far from overvalued. WFG is a $10B company. I'm not insinuating that you get parity barring a fundamental change as the land holdings are safe and stable at WY, but they hardly earn anything. Like $500M/year. The rest is the mills.
If mills stay strong WY parity is an outside possibility. You too could be a $27B company -- it will likely take 4x 2021 EBITDA by my count. (That’s embarrassingly low and below coal FYI). At current share counts that's obviously 2.7 times more, so $275/share CAD. But the kicker is the conditions that facilitate this are also the conditions that leave persistent cashflow, meaning it wouldn't be outside of the realm of possibility to get 20-30% bought back. A share count of 70% of today's number in the above assumptions is $393/share CAD.
Again, it's not a forecast by a bookend scenario as if you should be able to consider various cases even on the fringe like this. Being anchored to the same old biases (e.g. Darryl is always over) don't help. It's like the Kahneman book Thinking Fast and Slow.
Have no illusions about the math. The previous numbers were based on muted earnings, debt, and the market's justifiable disdain. What does this mean? It means when a tsunami of cash comes it's the Gorilla Game and the big guys can go to town consolidation on the cheap. It's winner take most. I largely ignore share price. All that matters is prospects, market cap, debt, and share count. With the first two are racing up, and the latter two are doing down fast, whatever quaint number you may be anchored to is going to be gone and quickly. I suppose you can tell I am not fussed about this $145 in the least, and moreover it largely became inevitable in my view about 3 or 4 weeks ago given the shape of futures and the sheer amount of financial might that’s been accumulated. Have fun earning ~~15% market cap in Q1 alone. These are gigantic numbers. If some company makes (in cash) $12 to $16 a share in a single quarter the contestation and angst about this audacious ~40% increase in one guy's target will be answered quite quickly for you. Is $145/share too high? It’s 50% above the 2018 high sure… but 2021 earnings are likely to increase by 2x to 4x that year. That’s combining WFT’s $1.5B and Norbord’s $0.7B. So, a 40% uplift in target but a 200-300% uplift in earnings? A betting man might just say that’s an asymmetric thing to wager on. I certainly have.