Dogecoin, Gamestop, now…. Lumber stocks?
The GameStop and AMC Entertainment Holdings feeding frenzy in late January forced Wall Street to change the play book and pay attention to retail investors like never before. The r/WallStreetBets community joined forces into one of the most bizarre investor community in the world, buying up the video game retailer’s stock and options, triggering a short squeeze and leaving short sellers with huge losses.
Now, investors are looking at a new type of “Meme Stock”, that of Lumber stocks. Right now the Price of lumber is so inflated that r/WallStreetBets and other “Meme Stock” reddit boards have turned their attention to it, mainly to make fun of it. Below are some recent examples.
Lumber prices are reaching new highs, and it appears there is no end in sight for the surging commodity. While it might not have the flair as Bitcoin, this commodity is already one of the key talking points among wall street analysts going into March. In fact, the commodity topped nearly $1,400 last week, a record high and a sure sign of a stressed real estate and building market.
Craig Johnson, chief market technician at Piper Sandler, said the charts forecast even more upside ahead.
“Stay seated, but it looks like you could have 30-35% more upside, based upon the size and technical breadth of this technical setup here for lumber prices. There’s no doubt that lumber prices are going higher”
The momentum of ongoing strong demand for new building, as well as for re-modelling, will result in continued large volumes of lumber sales until the end of the year, if not longer. The Figure Below aims to compare prices for benchmark softwood dimensional lumber and panels in January 2021 to 2020 prices. As you can see, we are in for a record year in 2021 for Lumber prices, and even its sub-commodities. Important to note, this projection has already been exceeded by the price of lumber.
The focus tends to befall on struggling or odd companies, much like the recent trend of focusing on ultra shorted companies. Now, the OTC markets is a prime example of where investors turn when looking for grossly undervalued (or overvalued) struggling companies.
Recently, OTC Mining company Kibush Capital (OTC:DLCR) revealed that they have increased their Lumber output. Now, this release was during a period when Lumber was not a hot commoditty, and it went unoticed due to the in-demand industries such as CBD and Cryptocurrencies.
However, now that Lumber is the highest increasing commodity, a number of analysts are looking back to see how much DLCR’s revenues are expected to surge based solely on the surging lumber prices.
This is from the company a number of months back:
$DLCR is pleased to announce that we have been approached by another group of landowners adjacent to the new Timber Authority to lodge another Permit for 5000 cubic metres a year, equating to a combined resource of 10,000 available to us. Cubic metre sale price = $650USD
Now, this was released when the price of lumber was nearly half of what it is today, just breaking the record $1000 mark. So, 10,000 cubic metres * $650USD = $6,500,000.
Today, the price of lumber is around $1000. So, 10,000 cubic metres * $1000USD = $10,000,000.
This is just one of their most recent deals. To date, they have numerous lumber deals. In fact, the company recently announced a number of new agreements, which are summarized below from a recent press release.
The first set of agreements is comprised of two rolling purchases orders to plywood factories in PNG (Papua New Guinea) at a max rate of 1000 cubic meters per month each. Additionally, the company will be able to sell the logs unprocessed straight from the resource area to their factories at a rate of $100 USD per cubic meter. The next agreement is with an exporter who will take as much as 4 containers per month (30 cubic meters per container) for export into India, at a rate of $650.00 USD per cubic meter.
The company has also made several significant commercial agreements that will help in continuous year-round operations. A road has been built that will allow 24-hour access to the site and can withstand all seasons; something that was a previous issue. Additionally, the 5-year agreement with the landowner covers 50,000 hectares and allows DLCR to sign another 7 landowner groups each with a minimum of 50,000 hectares each. This is a huge development for the company moving forward as there will no longer be a review period after each year, allowing for continuous operations and continuous revenue generation.
The company has also entered into an agreement with the Senunu Clan – the principle landowners of Senunu Timber area – to file a application to the Forestry Department for a Timber Authority permit, allowing for 5000 cubic meters of round logs to be harvested per year.