Timber Insiders Seeing the Forest

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 |  Includes: CFPZF, CUT, PCL, TWTUF, UFPI, WOOD, WY
by: Larry MacDonald

It’s hard to get more down-and-out than Canadian forestry stocks (except possibly U.S. financial stocks). Yet, some Canuck lumberjacks are attracting substantial insider buying, a case in point being International Forest Products (whose stock has also been exhibiting relative strength).

INK Research says:

“During the past 90 days, insiders at International Forest Products (IFP.A) have bought 616,900 shares in the public market. The biggest buyer has been board chair Lawrence Sauder who acquired 401,000 shares at prices ranging between $1.25 and $1.70 …. CEO Duncan Davies bought 100,000 shares at prices ranging between $1.77 and $1.92 and CFO John Horning bought 66,800 shares at prices ranging between $1.30 and $1.75. Other insiders who bought shares included officer Stephen Williams (30,500 shares), director John Sullivan (20,000 shares), officer Otto Schulte (7,000 shares) and chief operating officer Sandy Fulton (1,700 shares).”

The more senior and numerous the insiders, the more significant the insider-buying signal, research studies have shown. On this basis IFP.A is sending quite a bullish signal – which is rather amazing considering how dire housing and the economy now look.

On the other hand, the Canadian dollar has plunged from $1.05 (U.S.) to $0.77 (U.S.) in just over a year, making Canadian forest products much cheaper in the U.S. (and other foreign markets). In addition, a massive fiscal and monetary stimulus is being unleashed in the U.S. and around the world, which could produce another upturn in the business cycle at some point.

But could this insider buying be another head fake? In November, for example, an Investing Ideas blog post reported on insider buying at another Canadian forestry company, Canfor (OTCPK:CFPZF), and it is down more than 20% since then. Or will patience be ultimately rewarded?