Housing has its ups and downs, but its long-term growth looks assured.
This Warren Buffett holding can outgrow its end markets
Lee Samaha (Louisana-Pacific): Rising interest rates and a slowing housing market might make you hesitant to buy into a stock with heavy US real estate market exposure. That said, investing in equities isn’t about one quarter or even one year’s earnings, and demand for Louisana-Pacific’s wood siding and oriented strand board (OSB) is likely to grow over the long-term in line with new housing starts and repair and remodeling activity.
Moreover, there are a couple of reasons why the company’s products can outgrow their end markets by winning market share against its competition.
First, Louisiana-Pacific’s key raw material, wood fiber, is sustainably sourced, and its SmartSide products are carbon negative. That’s something that might help Louisana-Pacific win market share over siding alternatives like vinyl, cellular PVC, Polymer composites, and brick.
In addition, its OSB offers a price and sustainability advantage over plywood and can continue to wind market share from its key rival for use in boards and panels in home construction.
All told the company has long-term earnings potential, and although it’s facing a challenging year, Wall Street analysts expect this to be a trough year, with earnings rebounding strongly in 2024. As such now could be a good time to buy the stock.
