It’s beginning to look a lot like Christmas between all the holiday music, tree lightings, and Charlie Brown specials. For some of the naughty ones there will be a hefty monetary gift under the tree this year, especially for you, Plum Creek shareholders. Weyerhaeuser provided you with a 14 percent raise right before the Thanksgiving holiday, ensuring a Christmas turkey at your table this holiday season.
We researched timber at this exact time last month and the sector was in rags. The industry was in the process of recovering from a poor showing in the second quarter, and the outlook was certainly unclear. Timber was by far our worst performing sector in Q2, even worse than the office sector. That being said, several negative factors have hurt timber. For example, the housing recovery has been as slow growing as a Maine spruce tree, China has not been importing as much lumber, and Canadian imports have become far less expensive. This is all bad news to a U.S. timber investor.
However, Weyerhaeuser’s purchase of Plum Creek in early November has certainly lightened the mood at the end of the day light savings time. Based on our year to date list of 175 equity REITS Plum Creek moved from just an average performer into a top ten percent player in only a month. In November alone the company’s shares increased by 25 percent, with year to date shares up 19 percent.
On the other hand, Weyerhaeuser shareholders have yet to see the benefits of the purchase. Shares were up 10 percent in November but down 10 percent for the year. Rayonier and Potlach Corporation have also suffered the same magnitude of loss. Catchmark Timber Trust shares have also been flat this year.
Although boats rose in the segment, it does not mean that any of the fundamentals have changed. Q3 did provide better results, however one has to wonder if we will see figures improve consistently. There does not appear to be a consensus as to where the industry is heading. Opinions have tended to be as controversial as the outlook on the U.S. economy recovery.
Companies: Weyerhaeuser (NYSE:WY), Plum Creek Timber Company (NYSE:PCL), Potlatch Corporation (NASDAQ:PCH), Rayonier (NYSE:RYN), CatchMark Timber Trust (NYSE:CTT)
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Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.