Introduction Investors and shareholders like stock dividends and bond yields. They represent cash distributions to reinvest or live on. They also represent an opportunity cost relative to alternate uses for that money. Consider Warren Buffett and Berkshire Hathaway. The company pays no dividends (dividend yield = 0.00%). Rather, shareholders buy in and gladly leave generated cash in the hands of Warren and Uncle Charlie for use in other value-creating projects. In the ten years following the … [Read more...]
Timberland Investing: Harvesting Cash from Public Tree-Growing Firms
Dividend-paying stocks, and real estate investment trusts (REITs) in particular, have gained coverage as a fundamental part and strategic asset when building an investment portfolio. Investors value REITs for their regular and reliable income generation, and for their diversification. As James Glassman noted recently in Kiplinger’s, “…investing in stocks that pay dividends—especially rising dividends—turns out to be a terrific strategy. The S&P 500 Dividend Aristocrats index has returned an … [Read more...]
Timberland Investing: Key Lessons and Top Owners and Managers
Introduction Capital continues to flow into private timberlands, including publicly-traded timberland-owning firms. The benefits of timberland continue to speak to investors during periods of uncertainty: they secure wealth and produce cash through the cycle and over time. And part of managing these investments requires consistent attention to market data and perspectives from industry executives. Top Timberland Owners and Managers in the U.S. and Canada Top 10 lists grab our eye and … [Read more...]
Investment Opportunities in Timber REITs and Forestlands: Are You Guessing or Making Decisions?
Introduction We don’t succeed in business or investing by falling in love with our own ideas. We profit through comparing our prior decisions to actual results in order to calibrate our “model” of how the world works and improve future decisions. One reliable way to underperform as an investor is to buy timberland assets or stocks at the top of the market. What gets priced up ultimately falls, adjusts or reverts to the mean thanks to arbitrage and horse trading. Alternately, outperformance … [Read more...]
A Framework for Thinking Beyond Deviations in the Forest Products Industry
Introduction World events and shifting markets increase our awareness and interest in the broader range of disruptions potentially relevant to forestry. However, as we have long taught and written, timber markets are uniquely local. For strategy development and timberland investments, we want to specify the context of the disruption to best understand its absolute and relative risks. How should we think about these? With so many distractions competing for our attention, I often apply a … [Read more...]
Timber Topic: Timber as an Investment
This is part 5 of a 5 part series on Timber. In part 1, we looked at some of the factors that affect timber value, and in part 2 we reviewed how foresters assess timber on a property. The 3rd part looked at Timber Management Plans and Present Use Value. Part 4 continued the tax advantage discussion by looking at Tax Basis. In part 5, we wrap this all up with a discussion of timber as an investment. GROW MONEY ON TREES! Timber investments are typically long-term investments and can be … [Read more...]
10 Timber Properties to Own This Fall
Looking for your next investment property, a great place to hunt or just need somewhere to get out in the woods and experience the outdoors? Here are 10 timber properties across the U.S. that are sure to "grow" on you! 1. Pea River Hunting/Timber Tract (Barbour County, Alabama) This Pea River Hunting and Timber Tract in Barbour County, AL has it all: mature hardwoods, pines, food plots, excellent internal roads, abundant wildlife, paved road frontage, as well as Pea River frontage. … [Read more...]
Timber Topic: Why is the Tax Basis Important?
This is part 4 of a 5 part series on timber. In part 1, we looked at some of the factors that affect timber value, and in part 2 we reviewed how foresters assess timber on a property. The 3rd part looked at Timber Management Plans and Present Use Value. In part 4, we continue to focus on potential tax advantages by looking at why buyers and investors should establish a tax basis when they buy land with timber. ESTABLISHING A TAX BASIS When purchasing land with timber, there is value … [Read more...]
Managing Risk Through Diversification: Notes on Timberlands
Diversification is a risk reduction strategy illustrated in the idiom “don’t put all your eggs in one basket.” This implies we risk everything by relying on one asset, firm, idea or approach. However, in practice, anyone seeking to “outperform” the market needs to concentrate their investments in some way that yields sufficient excess gains to account for the costs and effort required to generate those gains. Warren Buffett often compares his approach of large bets on businesses he … [Read more...]
Timber Topic: Save Taxes & Grow Trees
This is part 3 of a 5 part series on Timber. In part 1, we looked at some of the factors that affect timber value, and in part 2 we reviewed how foresters assess timber on a property. In this section, we'll look at Timber Management Plans and Present Use Value. WHAT'S A TIMBER OR FOREST MANAGEMENT PLAN? When most clients hear talk of a timber management plan, they fear the sound of chainsaws and imagine clear-cutting of their forest. But in reality, a Timber Management Plan is … [Read more...]
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