ATM a thesis without a business, figured would post it here:
Within forest products, the lumber industry has seen declining growth rates the past few years while the mass timber industry is projected to grow at around a 12% CAGR between now and 2027. Modernization of building codes to allow for a wider range of mass timber buildings will enhance this even further. Data suggest the material has good ability to withstand fire and retain its structural integrity, it has performed well in simulated seismic events, and can be produced with a lower carbon footprint than most steel and concrete. The CLT (cross-laminated timber) segment offers designers the greatest freedom; since the pieces are laminated together in layers with opposing grain directions, it can handle stress on multiple axes. In the industry today there are a number of lumber businesses starting to develop their mass timber capability. I believe there will be a difference in valuation between a lumber company (mature business) and a mass timber company (new business, potential growth). In the long term it should be considered reasonable to value a good mass timber business at the industry average of around 10x earnings. At the present, many are trading below this multiple. What I’m looking for today is a mass timber company with solid fundamentals being valued as a lumber company. I hope that my search will be fruitful and look forward to sharing my results.