RE:RE:RE:RE:Pretty sadI'm on board with that. I don't normally like the "synthetic dividend" approach you'd map out in a finance class but it makes the most sense here.
Since the Nov 17 news, you'd be up what, $35/share? So sell some as a virtual div and pile into Acadian. It's "only" 5.9% but the windfall you got (by investing in this vs a cash cow) counts as part of the deal right -- I'd view it was getting 50% more torque there given the rise of WF. So the 5.9% ADN you buy today is 1/3 free money, menaing you're is effectively at 8.9%.
So, the grim future you paint can have a floor of sorts put under it with a div, but pragmatism dictates you try to carve out a better lot first by playing defence. It's not cash cow time yet. There have been 2 OK Q's, this is the first excellent one. They have some work to do weed out the foolish operators -- more M&A is coming. Fragmentation is bad and drives volatility. Notice how they tied up the equipment guys heavily too? They plus CFP and IFP get first dibbs. If you don't put capex in, someone else will.
Prices must be lowered, so the main guys are signposting this -- it a moderated and pragmatic way. No new builds, just capaicty adds that can toggle. That's priority one, is it protects against the big wipeouts driven by massive overcapacity. Too high for too long? Ohh boy. That’s bad'. OSB was different as permitting, IP, patents, and envrio challenges made it harder to add capacity. Lumber is easier. WFG is making it harder to join, as they should.
One great quarter alone is premature to change course anyway. After a string of them, sure. But you get a capital allocation frameowork then first.
Moreover, you want the div right? Yield and all? Well so does everyone else, but we don't just do the easy stuff first. I also want to rip it up in Vegas but I can't do that either. The exception is when you know the capex is a dud or presided over by horrid magmt. Then it's div and turf the mgmt. So, when you do get the div we all want, when that happens the price goes up, meaning your buyback days are over.
So the framework is buy back first if you can do so on the cheap. And the current price is cheap as if they and others succeed int he competitive strategy I alluded to, in conjunction with the macro tailwinds, you will see lumber prices normalize "high" -- like $700 to $900 lumber / $600 to $800 OSB. That's $4B ot $8B a year. Even the low end, when you realize it's here to stay and it creeps to 10x valuation (vs. the 2.5x currently afforded given the market belief of a steep crash) that's $40 B EV USD --- or four times more than today.
Becuase you do realzie the market value is telling you the view is one of two things long run: either it's worth 2.5x $300/unit margins which makes zero sense... so, the only conclusion is that the view is it's worth the EV dividied by10. So, $1B a year forever. That's sub $100 margins on wood and pannels. So US $500 lumber? $400 OSB? Bid divs make that more likely as it means everyone is happy. Up go the barriers. You don't need be be a finanace wiz, but a sense of competitive strategy is improtant. THey'll go off and Porter's Five Foreces this thing as they should.