1 of the top Canadian commodities stocks to consider right now


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The commodities space is the one that has outperformed this year. Indeed, few investors saw this coming last year, given the drop in demand due to the pandemic that we have seen. However, there are a number of commodity sets that may get more room from here. One of those commodity stocks that I have in mind right now is Western Fraser Wood (TSX: WFG) (NYSE: WFG).

Yes, this is a stock that has been on a great run. However, there are key fundamentals that could drive this stock higher over the next few months.

Let’s see why this is the case.

Addition of Norbord: big victory for this stock of raw materials

Earlier this year, West Fraser completed its acquisition of Norbord as part of a fairly significant industry consolidation.

The deal has both increased West Fraser’s market share and made the company’s business model more attractive to investors with long-term thinking in the lumber industry.

This year lumber prices have been extremely volatile, have skyrocketed over the summer and have recently fallen back to earth. However, this combination has made the West Fraser unit’s economy one of the best in the business. Therefore, investors considering this stable dividend paying stock might appreciate West Fraser’s current positioning at this time.

The addition of Norbord is believed to have improved West Fraser’s recent quarterly results, despite falling lumber prices from all-time highs. The Vancouver-based organization reported earnings per share of US $ 4.20 in the last quarter. This was compared to US $ 3.82 per share in the third quarter of 2020. However, these numbers were down significantly from the previous quarter’s record EPS performance of US $ 12.32, linked to the surge in prices of. lumber that we observed in the second quarter.

At the end of the line

West Fraser Timber is one of the largest lumber players in Canada. Lately this business has been in the right place at the right time. And while West Fraser’s recent quarterly results don’t match the second quarter, investors weren’t expecting it.

What intrigues me about WFG stock right now is its valuation. Currently trading at three times earnings (that number will swell, given the current commodity price situation), West Fraser is certainly a value class company.

That said, where commodity prices go from here is what many investors will be keeping an eye on. This bull market in commodities has been quite impressive. Thus, West Fraser remains an interesting bet on the direction that commodity prices could take in the coming quarters.

For now, I am on the sidelines with regard to this stock. However, West Fraser is a commodity stock on my watch list right now.


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