Over the course of the pandemic, there have been runs on toilet paper and sanitizing wipes.
More recently we've seen short-term jumps of prices in energy from Winter Storm Uri and shipping from the Suez Canal blockage.
But over the course of the last 13 pandemic-ridden months, no prices have soared quite like lumber.
Futures for random-length lumbers closed 2019 at $426.2 on New Years Eve 2019. The commodity futures slid until April Fools 2020 when they bottomed out at 259.8. From there, lumber futures, which are priced based on the cost of lumber per 1,000 board feet, went on to rise 376.75% to $1,4768.5.
Meanwhile, the cost of logs has remained dirt cheap, which is driving profit margins for lumber companies higher and higher. In late March, the stumpage fee, which is what lumber companies pay to landowners for their trees, was $22.75 in Louisiana and represents its lowest point since 2011.
One reason for the the soaring prices of lumber is that the United States housing market has been adding an amount of houses to the market that has not been seen since 2006. New home sales surged 20.7% month over month in March, reaching a little more than 1 million new homes sold during the month.
In addition to last month's high new home sales, housing starts have also been increasing rapidly, despite the ever rising construction costs incurred from lumber prices. Housing starts increased 19.4% to 1.7 million during March.
So with lumber prices rising sharply and lumber companies reaping all the benefits as the housing market continues to boom, investors are being granted great investment opportunities by the lumber market. This becomes an even better opportunity given that the prices aren’t expected to start easing until 2022.
One stock which could show this in full force in a few weeks time when it next reports earnings on May 6 is West Fraser (WFG). The Vancouver, Canada-based lumber company acquired Norbord on February 1, 2021 and has posted strong gains throughout the year.
Additionally, PotlatchDeltic (PCH), which is headquartered in Spokane, Wash., could be another good addition to investors' portfolios. Similar to West Fraser, PCH stock has experienced a steady rise over the past year. The company beat earnings this past Monday by $0.14 per share to report profits of $1.94 per share
For the more holistic investor, iShares Global Timber & Forestry ETF (WOOD), whose largest holding is West Fraser, could be a better option. Investment in the ETF would expose your portfolio to some of the bullish volatility that companies like WFG are currently facing, but toned down a bit by holdings in log sellers, REITs, packaging companies, and even International Paper (IP).
