If you think the forest products industry is boring, be sure to watch this video. I recall many years ago being invited to a live demonstration of heli-logging up close and personal on Vancouver Island. It was a remarkable experience.
Trees are gold in a booming country like China, and many of the logs originate in Canada.
A couple of weeks ago, while I was “reflecting” away from the market turbulence in beautiful British Columbia, Canada a friend pointed overhead, and said: “That’s how we do logging here on the West Coast.” A helicopter was flying by carrying huge logs beneath it.
In an older posting called Sino-Forest: Monkey business in China? Really! I talked about the perils of investing in any company where regulations, government and culture are significantly different than ours – introducing ‘country risk.’ Just this past Friday, the Ontario Securities Commission (OSC) ordered a 15-day halt in trading of Sino-Forest shares and said it appeared that Chan and other executives had misrepresented
revenues and kept bogus accounts. Allen Chan, chairman and CEO has now resigned and news from Reuters this morning- “Moody’s downgrades Sino-Forest to Caa1 from B1; further downgrade review.” Again, the rating agencies are many steps behind the real world. Re-read my post entitled ‘Debt rating agencies – worse than short sellers for corrupting markets.’
An alternative is investing in businesses closer to home that also benefit from economic growth in faraway places.
I wouldn’t go so far as to recommend the forest products industry as a growth business but periodically the winds of change will blow in the direction of even the most mature industries. The quality of logs demanded for construction, furniture and other uses increases in some proportion to the affluence of those wanting it so we can expect to see more exports to China from Canada, New Zealand, Australia and even South America.
My book spends much time explaining that it’s best to buy a sector when nobody cares about it, and there’s reason to believe circumstances for those companies might be improving in the forseeable future.
International Forests Products (IFP.A on Toronto Stock Exchange) is only one company among many, and forest products is just one example of many possible sectors worth considering while the markets are still languishing because of so much angst.
Yesterday I pulled my Harley out of the garage, and set out despite a dense fog to meet some fellow bike enthusiasts for our weekly gathering over breakfast. Surprisingly enough, the fog did clear eventually.
