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Bull of the Day: Norbord (OSB)

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The investing world is pretty uncertain these days, and with the threat of Fed action, the close of the year doesn’t look to be any less volatile. Add in somewhat sluggish economic indicators and a presidential election, and investors have a very unstable situation on their hands.

In these kinds of environments, it is probably best to bet on the top industries for investment. These top industries are seeing the best track records in terms of earnings estimate revisions, while the top half of our industry rank outperforms the bottom half by a two to one margin historically.

But today, let’s not look at some industry that is just barely getting into the top 50%, let’s look at one that is in the top one percent instead, the building products- wood segment. This area actually doesn’t have a single stock that is ranked ‘sell’ right now, while six of the eight names in the space have a rating of at least ‘buy’.

With these types of numbers, this could be a good space to watch in the near term. But which is the best bet in this industry? Well, one name to like right now is certainly Norbord (OSB - Free Report) , which has gone from a ‘Strong Sell’ to a ‘Strong Buy’ in just the past week alone. Let’s take a look at why this company is surging up the rank list, and why this might be the best choice in this impressive industry.

OSB in Focus

Norbord is a Toronto, Canada-based manufacturer and distributor of oriented strand boards which are used in a variety of home construction applications such as flooring, roofing, and sheathing. The company, like many others in the space, is benefiting from the robust housing market which is boosting demand for its key products.

And while the positive story for the sector is pretty well-known—as evidenced by the solid industry rank—investors are only just now beginning to understand OSB’s potential. This is best seen by inspecting the shift in the consensus estimate over the past two months in order to see what the impact of recent estimate revisions has been on OSB earnings expectations.

OSB Consensus

If we look to the recent changes in earnings expectations, we can see that the current quarter consensus has skyrocketed by nearly 60% in the past 60 days, a huge shift in expectations. Granted, the following quarter has seen estimates get cut by roughly 24%, but we are still seeing a double digit increase in expectations for the full year in just the past two months.

However, it isn’t just the current year that is great for OSB, as the following year is very solid as well. The consensus estimate on that front has gone from $2.01/share 60 days ago to $2.44/share today, an increase of 21%, baking in a nice rate of growth for OSB investors.

With recent shifts like this, it shouldn’t be a surprise that OSB has gone from a sell to a buy, and why this industry is looking promising right now too. And with a forward PE below 16, there is plenty to like about this stock, especially given its recent bump up into ‘strong buy’ territory.

Price, Consensus and EPS Surprise

Price, Consensus and EPS Surprise | Quote

Bottom Line

The buildings product industry is one that you do not want to miss. The housing sector remains promising no matter what happens with interest rates, and this could make it a go to area for investors in this uncertain time, and especially considering its impressive industry rank.

But while the segment at large is impressive, no company in the space is more notable than OSB, as this company is surging up the Zacks Rank charts. So, if you are looking for a top choice in this market, make sure to give Norbord a closer look.

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