I receive a lot of mail that I intend to follow up, and then run into time pressures. This is one of those – from a month ago.

From: milesdiz
Sent: February 22, 2006 11:58 PM
To: [email protected]
Subject: Timber Thesis
“Bill, Just read your latest ADVFN.com column. I'm intrigued by your comment:

the global economy starts to pick up, or gives me an indication it will not go into recession, I'll add some shares of the chemical and paper and forestry companies, which along with some of the golds is the place to be looking for values today."

My thesis is similar to yours, but I have already pulled the trigger on forestry by starting to build positions in high dividend paying timber companies that own gobs of land, like PCL and RYN. Thesis is that when inflation kicks in, the increase in value of their real estate holdings will exceed (or at least balance) their drop in timber sales. And with dividends I get paid to wait to see if the thesis plays out over the next few years. Could you comment on:

1. Is my thesis sound? Are dividend paying timber companies the place to be now? Or can you suggest a better entry point?

2. Got any better ideas than PCL or RYN? (I'm a US citizen and resident, if that makes a difference). I also believe the dollar will drop over the same time period as my thesis runs, so do you have any good non-dollar denominated high dividend-paying timber ideas?

3. Stocks like PCL and RYN seem to be trading in correlation with the broader US market indices, unlike my metals and energy positions. Do you think these timber companies will break out of this correlated pattern if inflation knocks the broader markets down but real estate investments keep up with inflation? Any history to suggest this, or the opposite (they all get knocked down)?

Many thanks, and hope you can find the time to answer! If it's too much to answer this solitary email, would be just as happy to see you address this subject in your blog....” /Milesdiz

Forestry is a special situation segment of the market, I feel. You need to be an industry expert to beat the averages, and to succeed I believe you need to follow a particular company closely and for a long time.

That’s investing, and I don’t have the time to invest; I’m a trader.

Also, in this particular marketplace, I don’t have the research data at my fingertips to do well, or to discuss it intelligently.

However, periodically I have been a trader in Weyerhaeuser (NYSE: WY), usually trading the options. Recently, WY had a small break-out.

Here are the Weekly and Monthly Data charts for the group of Forestry and Paper Products stocks I do happen to follow. I understand that this reader is asking about Forestry companies, but I added charts of the Paper producers as well.

Forest Products (Weekly Data)

Forest Products (Monthly Data)


Paper Products (Weekly Data)

Paper Products (Monthly Data)