Why CFF is undervalued even with recent 400% rallyLumber is up 300% since 1 year ago today. Let that sink in. https://imgur.com/gallery/MDhbuT6
It's ridiculous that a lot of these lumber companies are not doubled or even tripled what they were in 2018. One may argue that these prices are not sustainable hence the analysts and the market not giving CFF and other lumber players appropriate multiples.
Let me bring your attention to this quote by Paul Quinn who is an analyst representing RBC. "If you had lumber prices at this level in 2018, the share prices would be double what they are right now, but they’re not because investors are worried."
Mind you this was said when lumber was 600-700 or so, lumber is now flirting with 1400.
Everyone is waiting for lumber to fall and crash hard but reality is going to catch up with them. This rise in prices will last and I don't believe lumber will be falling past 800. (May 2022 futures point to $979 lumber)
Yes many believe 1000+ lumber is not sustainable however this is pushing margins up significantly and it isn't even necessary for lumber futures to stay high to get a nice return. In the case that lumber crashes hard, I'd be happy with lumber above 800 and we have been seeing that since December.
We can unironically compare lumber prices to the housing market boom we are facing in Toronto, not limited to Toronto but nationwide in Canada we are seeing similar trends where housing prices have skyrocketed. Many who sat on the sidelines waiting for it to crash are now the same ones buying and flipping houses. IMO the increase in housing prices will continue just like what we're seeing with lumber as we're approaching construction season.
Conifex is not a pure lumber play however the risk is arguably spread out a bit since the power plant obtains some solid revenue each year. Riskier than other lumber stocks seeing as how they have one mill but this should at least be trading to their 2018 levels. Especially since shares are being bought back and cancelled and net debt reducing each quarter. In fact I dont mind CFF trading sideways right now as management can take advantage of these prices to buy back as many shares as they can for less money.
I'm certainly late(er) to the party as i have bought shares in the 2.30-2.50 range but I will hold off on a price target until we see how Conifex performs Q1. Especially how their balance sheet is doing as I hope to see a significantly reduced amount of net debt in the next two quarters.
Good luck to all and I would like to thank those who provide insightful analysis to this board as it is good to look at stocks with multiple perspectives.