In short: Owned. The Quesnel, BC mill is "the largest lumber mill in the world" — an advanced-manufacturing asset (scanning/temperature tech), not a people business. His only other "commodities" holding besides the miners/tankers.
46:16We like the capital structure of that business. The only other business we really own in what I'll call commodities, we own West Fraser Timber in Vancouver. It's funny going out to Miota, that's the first site visit I've ever done in the oil business and we're 6 years into owning Canadian piece for example.
In short: Cole — owned a decade (since 2017 softwood-lumber dispute). Ran from the $60s to ~$140, back to ~$96 — good money to okay money. Two setups make it great: supply being curtailed (bullish), and an insider open-market buy from Jim Pattison (who bought counter-cyclically in COVID). The homebuilders' swing supplier is US builders; lumber's cheap.
West Fraser is a lumber producer Smead has owned for a decade, since the 2017 softwood-lumber tariff dispute. It ran from the $60s to about $140 and back to ~$96, so the easy money's been made — but two things could make it great again: lumber supply is being cut (which historically pushes prices up), and he'd love to see legendary Canadian investor Jim Pattison buy shares in the open market, as he did counter-cyclically during COVID. It's tied to housing, since US homebuilders are the swing buyers of lumber. He specifically avoids Weyerhaeuser, which he calls a sleepy "trust-fund stock."
1:01:23Have you discussed it yet? West Fraser. — Yeah, we own West Fraser. — You own West Fraser, a Canadian Lumber. Tell me about why are we buying Canadian lumber? — So, we've actually owned it for a decade. Okay. So, so um back to policy, back to Bill's point on United Health. We love when government gets involved with business because they tend to be bad at business and create opportunities for investors.
In short: One of "the three Canadians" — lumber names trading ~2x normalized earnings, a fraction of build-out cost, many with net cash. Most of their business is already in the US; capacity keeps coming out, so when demand normalizes the trapped earnings manifest.
West Fraser is one of "the three Canadians" — big Canadian lumber producers Robotti sees as classic value traps. They trade around two times their normal-year earnings and a fraction of what it would cost to rebuild the business, and many carry net cash (more cash than debt), so they're financially sturdy.
His key insight: even though they're Canadian, most of their sales are already in the U.S., and the timber simply grows where it grows ("the trees God planted in Canada can't move") — so tariff threats don't change the fundamentals. Lumber prices are depressed and capacity keeps shutting down; when demand normalizes, the suppressed earnings reappear and the stocks re-rate.
1:00:14So you're happy to get a 3 or 4% yield, and so Weyerhaeuser, but the Canfor, West Fraser, Interfor, those are the three Canadians that have a lot of business in the US and they're a lumber company, and so those businesses we think are very discounted in terms of valuation today. — Bob, this was incredible.
In short: Owned — the tariff precedent. Held through the 2016–17 softwood-lumber duty; lumber then re-priced from ~$300 to over $1,000/mbf — the tariff created a capital scarcity that enhanced equity returns. Up ~200% from the 2016 low. "My hedge is I don't care."
West Fraser is a big lumber producer Smead holds as his live example of how to handle a tariff. He owned it through the 2016–17 softwood-lumber duties: the stock fell fast, but the price of lumber itself then rose far more than the tariff (because tariffs choke off future supply). Investors who stepped into that fear were rewarded — the stock is up around 200% since 2016. It's the basis of his "my hedge is I don't care" line about today's oil tariffs.
24:57own it today it's one of the you know non Oil and Gas issuers We own up there and here's what happened the they back then it wasn't a tariff it's what they call an a counterveiling duty and anti-dumping Duty okay how that was addressed was Wilbur Ross which if you're listeners want to go down the rabbit hole of this we had Wilbur Ross on our podcast to talk about his book risks and returns and and Wilbur was who obviously did that as the Commerce Secretary on the Canadian Lumber coming across now ironically um those companies that they were
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