A Fund For Those Who 'Wood' Expect Lumber Prices To Continue Increasing
Investing.com | Apr 26, 2021 10:01
Lumber—a key homebuilding material—has become one of the hottest commodities of the past year as the price of the structural material has reached record highs. In March 2020, lumber futures were around $250 per 1,000 board feet. Since then, they have gone over $1,370, an increase of more than 448%.
The price action in lumber typically has a direct effect on housing markets. For example, the US National Association of Home Builders (NAHB) suggests:
"This price spike has caused the price of an average new single-family home to increase by more than $24,000."
According to recent experts do not necessarily agree. Increased US infrastructure spending could potentially help support prices.
Therefore, today's article introduces an exchange-traded fund (ETF) that could appeal to investors who continue to be bullish on lumber.
We want to add a note on terminology, as some readers might wonder about the difference between lumber and timber. Despite several differences that wood experts could easily highlight, the distinction in daily use is primarily regional. What is lumber in the US and Canada is essentially timber in the UK, Australia, and New Zealand.
With that information, here’re is our fund for today.
iShares Global Timber & Forestry ETF/h2 - Current Price: $92.42
- 52-Week Range: $47.67 - $94.80
- Dividend Yield: 0.85%
- Expense Ratio: 0.46%
The iShares Global Timber & Forestry ETF (NASDAQ:WOOD) invests in global timber and forestry businesses. These firms produce forest products, agricultural products as well as paper and packaging products. The fund started trading in June 2008 and net assets stand at $403.3 million. An average of about 65,000 shares are traded each day,
WOOD, which has 25 holdings, tracks the S&P Global Timber & Forestry Index. About 35% of the companies come from the US, followed by Sweden (14.87%), Canada (14.31%), Japan (9.97%), Finland (9.50%), and Brazil (7.0%). In terms of sectoral allocation, Paper and Forest products have the highest slice (53.11%), followed by equity real estate investment trusts, REITs, (24.11), and Containers & Packaging (18.73%).
The leading 10 stocks make up around 58% of the fund. Among the top names in the roster are Canadian West Fraser Timber (NYSE:WFG), which produces lumber and other wood products, timberland real estate investment trust Rayonier (NYSE:RYN), whose assets are in timber growing regions stateside and New Zealand, Weyerhaeuser (NYSE:WY), which owns or manages timberlands in the US and Canada, and Sweden-based forest owner Svenska Cellulosa (ST:SCAb) (OTC:SVCBY).
In the past 12 months, the fund returned 90% and hit a record-high in April. Those investors who follow technical charts will notice that momentum oscillators and relative strength indicators are extremely overbought.
Although they could potentially stay so longer, short-term profit-taking could easily be around the corner. Interested investors who expect prices to go higher in the long-term could regard a decline toward the $87.5 level as a better entry point.
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