The trees do not look at the stock market. Forests continue to grow – and potentially increase their value – even when inflation rises or the market is upsetting.
Large investors, such as college supplies and insurance companies, spent a lot of time in Timberland at places like Oregon fir and fir trees, Georgia pines plantations, and Appalachian groves.
Until a few years ago, retail investors were mostly excluded from this market. Offers were too large, involving thousands of acres and tens of millions of dollars.
This has changed over the past 15 years with the introduction of two types of lumber E.T.F.s – iShares Global Timber & Forestry E.T.F. And the Guggenheim MSCI Global Timber E.T.F. – and the evolution of large forest companies such as Weyerhaeuser and Rayonier. Today, large wood companies are organized as estate investment fiduciaries (R.E.I.T.s), focusing on forest management, after selling many other operations.
Ordinary investors can now put money into timber without venturing into the woods. Purchase of shares of an E.T.F. About a R.E.I.T. Do not replicate the advantages of directly owning vast forests, but it allows you to bet on timber.
FOOT SIZES | INITIATIVES
For some investors, money grows on the trees 27 MAY 2007
And there’s an old-fashioned option: buy a small woodlot of your own. This is more like part-time work than a passive investment, but it can produce financial gains.
“If you look at South American statistics, nearly two-thirds of the timber harvest comes from small landowners,” said Robert G. Flynn, international timber manager, for RISI, a forestry research company
E.T.F are more diverse than their names. They own timber companies: both count Weyerhaeuser, Rayonier and Potlatch, the major R.E.I.T.s, among their companies. But they also invest in International Paper, WestRock packing and (in the case of Guggenheim) Sealed Air, perhaps better known for the Bubble Wrap plastic.
“Investors should always buy an E.T.F. With their eyes open and understand that some things that come with the package can not be what they had in mind,” said Todd L. Rosenbluth, director of E.T.F. And the search for mutual funds at CFRA, a research investment firm.
In terms of returns, the E.T.F.s looked more like spindly trees than strong sequoias. The Guggenheim fund failed to match S. & P. 500 in the last three calendar years and the iShares fund did not do it in 2014 and 2015. Last year, the Guggenheim fund returned 5.7 per cent , While the iShares fund returned to 10.8 percent, against 12 percent for S. & P. Including dividends.
William H. Belden III, head of E.T.F. Development of business for Guggenheim Investments, said timber company E.T.F. He underlined a subsector. “Timber is a proxy for the economy and how it is doing, especially building and home,” he said. Some investors want to emphasize the timber in their wallets and focus E.T.F. Let them do it, said Belden.
Owning R.E.I.T.s timber is a more direct, if more risky way to bet on the woods. These companies have forests in the United States. Approximately 13 million hectares of Weyerhaeuser approximate the combined area of New Hampshire and Vermont. Weyerhaeuser and Rayonier also have overseas land, the former operating in Uruguay and the second in New Zealand. Potlatch owns only domestic timber.
Daniel P. Rohr, analyst Morningstar, called REITs a “pretty good substitute” for timberland’s “because the assets are the same.” In both cases, cash flows from the forest, either by collecting trunks or selling land. He warned that whenever people buy quotas in a single R.E.I.T. Or any single action, they are taking specific investment risk for businesses, such as potential bankruptcy. “If I own a timberland R.E.I.T., it’s because I’m bullish on American housing, not because I want to add a diversification to my portfolio,” said Mr. Rohr.
Campbell R. Harvey, an economist at Duke University, also warned that timber does not improve the risk of a portfolio or reduce the risk. Raw materials, such as timber, can help protect investment against “an unexpected burst of inflation,” he said. But timber should be part of a larger commodity fund or E.T.F. They can also invest in petroleum, natural gas, metals and other agricultural products. “It is unfair to think that timber only fills the bucket for the goods”,
“I would say that it’s not up to reaching a $ 1-million range more than we always start on properties that are mostly driven by their return on investment,” said Jim W. Hourdequin, Lyme Legname’s CEO, In Hannover, NH
Yet owning a 100- or 200-acre woodlot can make sense for someone who enjoys land for reasons beyond its financial return, said Tom D. Martin, president of the American Forest Foundation.
Mr. Martin and his sister have 200 acres in northern Wisconsin, and collect some of their hardwoods, especially sugar maples and red oaks, every twelve years or so. Income covers taxes, insurance and road maintenance charges. Meanwhile, their families face the cabin on the property. “Memories and wildlife are the richest return,” he said.
When a novice decides to buy timber, the first step is to hire a forest that can help you select a plot, said Keith A. Argow, chairman of the National Woodland Owners Association in Vienna, Va. The forests will evaluate the trees and their quality, the soils and other growth conditions, and also the proximity to potential customers such as sawmills, he said. Assuming you find the right property for a good price then you have to handle it. A forests will also help plan a plan for this, including when to collect and how much.
A management plan can help owners draw on other sources of money such as leasing hunting rights or participating in state programs that provide for tax relief for, say, improving the habitat of wildlife or water quality, Said Raymond A. Lamberton, president of New England Forest Consultants. In the northeast, someone with maple sugar could sell maple syrup. But all of these income streams probably do not fit into the big return. “Where you put the money is resold the land,” said Mr. Lamberton.
Daniel E. Crocker, an Educational Administrator in Bangor, Me., He did not buy his own woods, in the nearby Exeter, Me., At the harvest of lumber. He and his wife, Chris, bought their first 40 acres in 2002 because they wanted a cross country skiing, cutting Christmas trees and watching wildlife with their two children.
A few years later, they bought two adjacent parcels, bringing their total holdings to 96 hectares and the total cost to about $ 75,000. The land had not been registered in 25 or 30 years and they realized that timber sales could bring in cash, said Crocker. Since then, they have collected twice, with about $ 15,000, he said. The proceeds were reinvested in the property, in the form of trout pond, of a road and improvements in the wildlife environment.
“You’re not going to fund your kid’s education or retire at 55 this way,” he said. “But you can integrate your income.”
Although the Crockers are generating money, the biggest return was physical and emotional, Crocker said. Right now, the forestry wood market, largely spruce and fir in Maine, said, “It’s gone in the belly but I’ll still be in alpine skiing on our property on Saturday morning and we can still make maple syrup” .