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If you've ever been able to join us on Money Morning LIVE - and I really hope you have - you know we run and track a free model portfolio for our viewers. In this industry, people can and do pay thousands to access research picks like this, but we think free is better.
We haven't sacrificed a shred of performance, though. I just added what I think is going to be an outstanding performer to the portfolio - a true value stock, naturally.
And I recommended an easy-to-make trade that pretty much anyone can execute to line their pockets with even more cash while baking in an even deeper discount on the shares.
I want to make sure everyone gets this pick, though, so I'll give you the ticker and trade here...
This Company Ticks All the Boxes
I'm talking about Louisiana-Pacific Corp. (NYSE: LPX). This stock is comfortably in the nexus, you might say, of several trends playing out across the country right now.
These folks sell building materials, in the middle of a blistering real estate boom which has just seen U.S. new home sales top six-month highs.
But... at the same time, lumber - it's not exciting, but it's important to this story - has been on a hair-raising ride, as anyone who's tried to build a house or even just redo their deck recently will tell you.
Lumber prices had rocketed something like 300% between the onset of the coronavirus pandemic and the spring of 2021, when prices hit a high above $1,500 per thousand-board feet. Oriented strand board, or "OSB," which is a kind of wood product not unlike particle board used almost universally in home construction, soared 500% over the same time frame.
But then, by this past September, the "Wood Bubble" had popped, and lumber and wood products gave up pretty much every last nickel of the price gains they'd seen since the pandemic started.
That, and the global raw materials shortages, might've spelled trouble for a company like Louisiana-Pacific, but the company managed to rise above that whole mess to destroy analysts' third-quarter estimates on the top and bottom line.
Check out some of the juicier tidbits from Louisiana-Pacific's most recent earnings call...
Strong Performance in an Inflationary Environment
We saw a 15.9% upside surprise on earnings per share... $522 million in earnings before interest, taxes, depreciation, and amortization (EBITDA)... net sales of $1.22 billion, up 55% from Q3 2020. Its siding, OSB, and elevated work platform segments all grew by high double-digits in the third quarter; demand is strong.
Its cash position is dynamite for a company in this business, with something like $607 million in cash ($511 million from operations alone), and the company slashed its already low debt to $346 million.
Now, at $67, Louisiana-Pacific might not feel cheap, but that price represents a double-digit discount over where the stock should be right now.
The stock is even cheaper relative to its sector-mates in the S&P 500 Basic Materials sector - LPX price/earnings ratio is under 4.75 right now, around 75% lower than other Basic Materials stocks. It's a deal too good to pass up.
But there's a kicker, as well, to sweeten that deal. I recommended writing a cash-secured put on these LPX shares to try and get them even cheaper...
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We sold one LPX Jan. 2022 $65 put for $3.60, which means we got the chance to pocket $360 for every 100 contracts and we put the cash aside to buy the stock at $65, an even deeper discount. You can make the same move - no special clearance needed.
I'd love it if you'd join us each day for Money Morning LIVE. I'm taking the day off on Nov. 5, but I'm usually there to call the open, pick the best value stocks I see, and keep people posted on the free model portfolio - Standard Lithium Ltd. (NYSE: SLI) is a particularly strong performer there, but you'll have to join us to get a peek at the rest.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.