Housing is a cyclical industry, but its long-term growth trajectory looks assured.
The wood products company has an opportunity to grow its market share
Lee Samaha (Louisana-Pacific Corporation): If you are worried about where a company’s revenue is going in the next quarter or the following year, then it’s unlikely you will see Berkshire Hathaway holding, Louisana-Pacific as an “ultra-safe” stock. On the other hand, Louisana-Pacific could be for you if you like the long-term potential of the housing market and believe that wood siding and oriented strand board (OSB) have a crucial role to play in new housing construction and remodeling activity.
The company is the leading producer of engineered wood siding and a top producer of OSB. As such, its fortunes are tied to the housing market – so no surprise to see the stock recently report harsh trading conditions.
That said, the interest rate hiking cycle won’t last forever, and it’s worth noting that housing starts are significantly below where they were in the 2000s before the housing bubble burst.
Data by YCharts
Moreover, its sustainably sourced and environmentally-friend engineered wood siding has an opportunity to grab market share from materials like vinyl and cellular PVC. Meanwhile, OSB continues to win market share from plywood as the panel material of choice among architects.
Suppose the summer of 2023 proves to be a multi-year low for the housing market. In that case, Louisana-Pacific shareholders are set to enjoy a multi-year recovery, which will probably include dividend increases.
