Plum Creek Timber Investing: Timberland Investments Are Boring, But They’ll Make You Rich

By Dr. Steve Sjuggerud, Chairman, Investment U
Monday, August 15, 2005: Issue # 461

“Buy shares of Plum Creek Timber” That’s what I told attendees at the Agora Wealth Symposium late last week in Vancouver.

Plum Creek Timber (NYSE: PCL) “owns” the state of Mississippi. It also owns the state of Wisconsin. And the state of Maine

Okay, not really. But Plum Creek is one of the largest landowners in each state in the U.S. In fact, Plum Creek Timber owns about 8 million acres of timberland, well diversified across the nation, as you can see in the chart below:

Even better, Plum Creek is currently valued by the stock market at roughly $8 billion (that’s the “enterprise value,” which is the most appropriate figure in this case). So by buying shares of Plum Creek today, you’re paying about $1,000 an acre for shrewdly managed timber.

Why timber investments as part of your investing strategy? I’ve gone over this in past Investment U E-Letters but in short, timber has beaten the stock market over the long run, with less volatility. Amazing! One look at the following chart of Plum Creek Timber versus the stock market since 1989, and you’ll see what I’m talking about:

Plum Creek Timber vs. the Stock Market: It’s No Contest

• Plum Creek: Up 1,200%

• The S&P 500 Index: Up 200%-Plus

Buying Plum Creek at $1,000 an acre for 8 million acres is a no-brainer

If $1,000 an acre for prime timberland wasn’t cheap enough a full 1.3 million of Plum Creek’s acres have been designated by the company as “higher and better use” lands. That basically means lands that will be sold to a developer someday – at much higher values than the value of the timber alone.

“Boring” Plum Creek Timber: From $3 To $35, and At $1,000 An Acre, It’s Still Cheap

The chart above also includes dividends reinvested. I mention this because this is an important part of your investment: Plum Creek pays a 4%-plus dividend. This dividend comes from the sustainable harvest of timber every year, and from selling off some of the higher and better use lands at large profits.

Why Else Does Timber Look Attractive as an Investment?

One of the main reasons is because the trees don’t know about the war in Iraq, or the housing bubble, or the Nasdaq bust. They just keep growing exponentially on the stump, at a rate that would make most big companies envious.

In addition to the compound growth of the trees, the value of the wood has gone up at a rate of 3% a year above inflation, for the last 90 years, according to legendary investor Jeremy Grantham. So the trees grow exponentially, and the prices of the wood go up, too. Nice.

China and oil take up all the headlines. That’s fine. Timberland investments will never be the toast of the cocktail party. They’re boring But they sure can make you rich over time.

Right now, Plum Creek Timber is the easiest way for individual investors to own a diversified portfolio of timberland, all in one stock. Fantastic land, all across the country, at $1,000 bucks an acre, paying you a 4% dividend now that’s a deal.

Check out Plum Creek Timber (http://www.plumcreek.com). If history is any guide, timber may turn out to be a safer place to invest than the stock market or the real estate market over the next five years.

Good investing,

Steve

Today’s Investment U Cribsheet

• To read more about commodity investments like timber, read our interview with investor Jim Rogers.

• Momentum Investing: The Secret to a Red-Hot Stock Portfolio
• Alternative Energy Investments: Three Scenarios For Clean Energy
• Casino Stocks: The One Sin Stock You Should Be Betting On

Sign Up now and receive this Free report: Collect 122% in the Next 12 Months From Gold's Surge.

Could you use an extra $600 - or more - each month?

If so, you’ll want to check out the details of an overlooked government-backed program in THIS REPORT.

It shows you why the government is set to distribute $457 million to a small group of recipients, how to get your name on the list and the exact deadline you must meet in order to qualify.

Comments

Check out our selection of daily Investment Research:

We Respect Your Privacy

---

What is Investment U?

Since 1999, Investment U has provided impartial, no-nonsense investment advice on how to build long-lasting wealth.

---

Recent Articles

Platinum Services

The Oxford Club is an exclusive, global network of investors, who collectively participate in the pursuit of prosperity and wealth. The Club is renowned for its market-beating, tried-and-true investment principles.

The White Cap Report exclusively identifies companies, White Caps, which - by being among the earliest to gain traction - have secured dominant positions within untapped, billion-dollar markets.

With an elite trading team at the helm, the Xcelerated Profits Report shows any investor how to "invest like a pro," using high-level, yet easy-to-execute strategies that "xcelerate" profits while minimizing risk.

---