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Should You Buy Timberland Stocks Now? Part IBy
Friday, October 29, 2010
"Would you like my snake leggings?" she asked.
No one had ever asked me that before. I didn't know how to respond.
"Is she coming on to me?" I wondered. "Oh, wait, maybe I need to worry about snakes..."
You see, earlier this week, I walked a few dozen acres of Florida swamp... "marginal timberland" acres. At least that's what The Expert who was with me called them.
I didn't take his assistant up on her offer for the snake leggings. But I did borrow some 16-inch-high rubber boots from The Expert.
"Keep your eye out for snakes right here," The Expert told me, 45 minutes into the adventure. To be honest, that advice wasn't much help. The only way I was going to spot a snake in wet grass that deep was if it lunged at me.
I'm out here because lumber prices have shot up from a low of $140 per 1,000 board feet in 2009 to $240 as I write. Yet timberland prices are down, according to The Expert.
"We're finally beginning to see some capitulation on the part of landowners," he told me. "Transactions dried up... we just didn't see many land sales. Now sales are going again, at lower prices. Sellers who were asking peak prices finally caved."
So I'm out here in the woods, looking around.
My thinking is simple: I can put my savings in the bank, earning zero percent interest. Or I can put some of my savings "on the stump" and have my investment grow exponentially. I have way more upside than at the bank...
The thing about trees is, they just keep growing. They don't care how much money is being printed in Washington. They don't care about the Great Recession or the jobs picture. They're oblivious. They just grow and grow.
Unlike cash, wood prices (specifically "stumpage prices," which incorporate the economic value of the entire tree) have beaten inflation over the last century.
Which would you rather have... an investment that has safely beaten inflation... or cash in the bank that earns zero percent interest and gets crushed every year by inflation and money-printing?
Your main issue when you own timberland is simply liquidity. You can't get your profits out of your land in a day like you can from the bank.
There is one way around this: Buy timberland through the stock market...
Two relatively new ETFs – symbols "CUT" and "WOOD" (no joke) – get you exposure to worldwide timberland companies. You can also get direct exposure to timberland through companies like Plum Creek Timber (NYSE: PCL) and Rayonier (NYSE: RYN).
But are they a good deal now?
Tomorrow, I'll share with you The Expert's take on the future of timberland, both in raw land and in the stock market...
Until tomorrow...
Good investing, Steve
Further Reading:
"When stocks fall," Porter says, "timber usually doesn't... It's a time-tested way to get out of cash and conventional equities and earn higher returns, with much less risk." Get the full story here: This Safe Land Investment Can Protect You from the Dollar Crisis.
Market NotesTHE BIG TECH STORY IS GETTING BETTER AND BETTER Another big tech cheapie is "leaving the station"... This time, it's Microsoft.
In early September, we highlighted how dominant tech companies like Intel, Microsoft, and Google were cheap and out of favor with growth-focused investors. But these companies are almost monopolies on computer and Internet usage... with big profit margins, ironclad balance sheets, and huge cash hoards.
Google resolved its "out of favor" situation by skyrocketing 33% just after our note. And last week, we showed how Microsoft is busy carving out a tradable bottom... and working its way to a breakout above its August high around $26 per share.
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