Over the past year, we've seen a panic over the price of chicken, used cars, and even lumber. Now, with lumber prices dipping off record highs, investors wonder if it's time to build a solid foundation of profit.
What are the best publicly traded lumber companies that are integral to the industry during this crazy time?
Lumber prices are coming off all-time highs.
Now, the price of wood is on a downward spiral, with the market causing an industry correction after such strong surges.
However, consumers haven't taken advantage of the lower price yet. While the current price per thousand board feet is $667 (much lower than the $1,686 it cost a few months ago), companies are still selling old wood. This means that it will be some time until the savings trickle down to the builder and consumer levels. Soon, experts expect the price per thousand board feet to hit as low as $350.
Chop your way into the lumber industry with these five stocks
UFP Industries Inc. (NASDAQ:UFPI) is a big lumber player. Shares rose 62 percent from the beginning of the year through May 6 before dropping off about 20 percent in the months since. The long-term upward trajectory is likely given the stock's historical performance.
REIT company Weyerhaeuser Co. (NYSE:WY) rose more modestly at a rate of 19.54 percent during the same period before dropping off 11.63 percent. The fact that the company is a REIT puts it in a unique position in the lumber industry.
Rayonier Inc. (NYSE:RYN) saw 27.32 percent growth during the same period, but unlike its competitors, it has gained another 1.03 percent since then. The Florida-based lumber company is also a REIT, which makes it a potentially lucrative investment.
The iShares Global Timber & Forestry ETF (NASDAQ:WOOD) offers built-in diversity, which is something that individual stocks can't provide. The shares are up 9.44 percent YTD with moderate volatility over the stock's lengthy market history.
Another lumber fund is the Invesco MSCI Global Timber ETF (NYSEARCA:CUT), which is up 11.5 percent YTD. CUT shows natural long-term fluctuations in line with historical housing market behaviors.
Is lumber a good investment right now?
With lumber prices down, we're coming up on the ideal time to start building your brand new home. As an investor, it's a different story.
Lumber prices are decreasing at a rapid rate—a correction for wild highs that accompanied supply chain issues during the COVID-19 pandemic.
However, demand and manufacturing are about to bust wide open, especially with no end to the housing boom in sight.
Lumber might be an intelligent long-term investment, but it might prompt risk-averse investors to hold off until price decreases lose their speed. With futures down, this could be a waiting game that winds up paying out in the end.