I have see a lot of articles lately on investing in Timber being a great long term play as well as a solid holding during a recession. Does anyone have experience in this sector? What would be a good way to get exposure to timber? Buying a stock like Weyerhaeuser Co. (WY)??
I don’t have any experience here but if you are looking longer term you might want to try the Forestry REITs. PCL, PCH and RYN are the ones of which I am aware.
No kidding…the past 3 speaker in my local CFA society were all talking about timber investment. None of our client in the book fit the profile (well, simple not wealthy enough).
WOOD.L (iShares S&P Global Forestry and Timber)
I have a couple of people in a timber fund thru an LP. You could buy a stock or REIT or toss your money in with an external group that invests in timber. Past couple of years haven’t been too hot, but that doesn’t mean anything moving forward. I know there are a couple of outfits in Washington state. I guess if nothing else it sounds pretty sexy and exclusive right?
I’ve been looking at WY as of late and some of the other timbers as well. I think timber being most tied to housing and new home construction it may be a good time to get in when everyone is so bearish. Does anyone else know the most prevalent factors affecting timber prices aside from new home construction?
BIP is a spin off and a good play on infrastructure. They own some timber in there as well (not predominant though). I think distribution yield is about 6.2% right now…
^ im interested in a pure timber play - not infrastructure
Other than ones metioned above another direct play is DEL.
Merrill did a report on Feb. 19 about high timberland valuations and the influx of institutional money (they don’t like it for valuation, just statistical reason like correlation). As a value investor, it makes me want to look no further or even short it.
You can try CUT, the Claymore/Clear Global Timber Index ETF.
Here’s the best way to invest in Timber. Purchase 40-80 acres of land with reliable road access, though far enough away from civilization to still be relatively cheap (100-200k). Look for land that has enough current timber on it (look at the species, maturity, etc.) so that you can log it immediately and recoup some (or all) of the cost of the land purchase. Either learn about the different species yourself or have a consultant walk the track of land with you. Then, re-plant with a solid tree species (one that will thrive in the local climate and is relatively stable in price over time). The cost of replanting will probably run you between 25-75k, depending on a variety of factors. Now comes the hard part…wait 25-35 yrs. You’re property will then be worth between 4-7 million. Not bad if you ask me.
^ Have you done that? You think something like that would outperform an equity portfolio over 25 years? It seems like there would be a lot of costs involved that would eat into the type of plan you proposed.
I have not done this myself, but part of my extended family has been doing this for about 20yrs. Now I’m no expert on it at all, but the above is the basic premise on what they do. I think this is basically what a lot of the timber companies are doing themselves, just on a much larger scale. They’ll own a few million acres of land and sustainably log it over time, while making sure the timber species they choose to cut is going at a premium. It’s really not rocket science and something you can certainly do on your own, given you do the research. The catch is to make sure you don’t get ripped off along the way (you’ve got to contract out the actual logging). You’ll have some rough dude quote you a certain amount, which may or may not be fair, but then you miss the fact that only 4 out of every 5 trucks of timber are being taken to the sort. (ie…4 for you, 1 for him). It’s an extremely lucrative business if you’re willing to get your hands dirty. Now, don’t get me wrong, my first reply was written partly in jest. I don’t expect you to actually go out and do this, but somewhere down the line you may want to consider it. 80 acres of mature timber is a great present to leave your grandkids 30 yrs from now:) I’m always interested in learning about making money in ‘off the beaten path’ ways. Another one is King Crab, don’t get me started on that… Edit: I wouldn’t do this over a well managed equity portfolio, but there’s something to be said for actually being able to see and touch your investment. I don’t think the demand for timber is going anywhere but up over the next 30 yrs, either.
I think timber REITs are going to be your best option - PCL is probably your best bet on the traded side. Wells has a non-traded Timberland REIT which is interesting. As someone mentioned earlier their may be some LPs around. If you’ve got about $5mm to put towards timber you can start looking at TIMOs. I’ve worked with Timbervest in the past.
Ive got some trees in the North Island of New Zealand, and like islandergold mentioned, it’s definitely a long-term investment but I must say they are pretty to look at.
VirginCFAHooker, do you have the Merril Report? I’d be VERY interested in receiving a copy.
mcpass Wrote: ------------------------------------------------------- > VirginCFAHooker, do you have the Merril Report? > I’d be VERY interested in receiving a copy. I would be interested as well
Can you capture CO2 sequestration credits in your REITs?
yes, i have a few timber reports. Email me at firstname.lastname@example.org and put timber in the subject line (to cut through the spam!) and I’ll forward them to you.