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Top TFSA Investments: Canfor Pulp Income Fund (CFX.UN)

Friday, October 23, 2009

Top TFSA Investments: Canfor Pulp Income Fund (CFX.UN)

Canfor Pulp Income Fund is one of the strongest forestry companies in Canada with a great balance sheet to make it through this recession and further potential future bumps in the road. This fund was recommended previously on this blog in the article Income Trust Picks for my TFSA
Canfor Pulp Income Fund (TSE:CFX.UN) is involved in the supply of pulp and paper products with operations based in the central interior of British Columbia. The fund was created to acquire and hold a 49.8% in Canfor Pulp Limited Partnership (CPLP). The fund owns and operates 2 Northern-Bleached Softwood Kraft (NBSK) pulp mills and 1 NBSK pulp and paper mill. The mills have the capacity to produce over 1 million tonnes of NBSK pulp and 140,000 tons of kraft paper.

The forestry sector in Canada has been in what some might call a depression for well over 5 years and many smaller outfits have fallen by the way side. The real bread and butter have always been the US Housing market, but NAFTA Softwood Lumber issues negatively affected most Canadian Forestry companies before the World Recession began. As a result, forestry sector stocks such as Cascdes Inc (TSE:CAS), Domtar Canada Paper Inc (TSE:UFX), Catalyst Paper Corp (TSE:CTL), Fortress Paper Limited (TSE:FTP), SFK Pulp Fund (TSE:SFK.UN) have been pounded over and over. Only the strongest have survived and of those Canfor is one of the best. With lumber prices on the rise again and the rumbling of logging trucks heard again throughout BC Canfor looks like a real winner.

Canfor (CFX.UN-T) is currently rated by Thompson Reuters as 8 out of 10 while the Forestry & Paper Sector as a whole is ranked at 6.2/10. There are 9 analysts listed as publicly following the fund and of those 1 ranks it a Strong Buy, 5 a Buy, 2 a Hold, and 1 a Reduce. The current price is around $5.69 with a 52 week high of $6 and a 52 week low of $1.30. Analyst estimates at this point place the fund in a range between $3.25 and $8 with a mean of $5.19. The current dividend is lacklustre at only 2.1%; however, when the company gets back to production there will be a huge spike.

As I made acquisitions in my TFSA I ran out of room for this fund since TFSAs this year only allowed a max of $5,000. Due to the extent of dividend payments I have received to this point in my TFSA I am now ready to add another acquisition to the mix. If the recession does end the US then this fund should do very well. Looking at a 5 year Chart you can see that the fund reached a maximum price around $16. Further, looking at the chart I can see the long term down trend is about to be broken.

For more TFSA picks take a look at the following articles:

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