2008 Tree Calendar From Sean Kernan

Among Trees is the name of Sean Kernan's 2008 black and white calendar with twelve wonderful photos of individual specimens and stands of trees from Hawaii to England. See his work at amongtrees.com.

Forestry 101 for New Forest Investors

Years ago there was a cartoon in a leading magazine that summed up forestry for many investors. A clearly well-to-do grandfather was walking in the autumn woods with an attentive grandson. The caption had the grandfather saying something like, “Yes, it is good to know about trees. Just remember nobody ever made big money knowing about trees.” As forestry ventures get more attention as an investment asset class, it may be time to revise that opinion. Here are a few characteristics of forests and forestry (how forests can be managed) that can be important to investors.

First, from a “nature” point of view, investment forests come in two varieties. “Natural” forests are forests that the Germans had in mind when they coined the phrase, “no one has it as good as the forester, the trees grow by themselves”. They occur naturally and have had a wide range of human intervention, but will continue to be forests until a catastrophe or a determined human effort makes them into something else (a housing development for example). In many places, even when these forests burn in hot fires, they come back over time to cover the same area with trees. The other kind of forest, and one becoming rapidly more popular, is referred to as a “plantation” or planted forest. These may be on the site of earlier natural forests or on land that hasn’t had trees on it, at least recently. Each has contrasting advantages and disadvantages for investors, which we will describe in later articles.

Plantations and natural forests do share some investment characteristics. First, the trees in the forest are capital, or the means of production, and the product, at least when the desired product is wood for the market, which it most often is. When a tree grows, new wood is put on over the old wood in the trunk as the cells in a layer under the bark (called the cambium) divide and expand. This process is driven by photosynthesis, the sunlight- driven creation of carbohydrates in the leaves and the water and nutrients taken up by the roots. Thus, as the trees grow, both capital (the whole tree and whole forest) and product (wood) are increased. This is somewhat like having a factory that makes it own machines while making other saleable goods, and is one of the investment advantages of forestry. If no trees are cut, and the forest remains productive (more about this in a later piece), the forest goes on increasing in value because of wood growth and increased productive capacity, at least up to the limits imposed by the environment. So, unlike agricultural products which must be harvested when ripe, the forest owner can choose a harvest time that best fits the market and his objectives.

But when trees are cut and sold, both capital and product are gone, at least to the degree the trees are removed. Natural forests and plantations both vary greatly in the time it takes for trees to become large enough to sell. In most “commercial forests”, those intended to produce economic returns to wood production, this varies from a few years to a century. Almost invariably, however, it is a multi-year process, meaning that the initial amount invested has to be “carried” for a fairly long time, at an appropriate interest rate, before any return at all is realized. Thus if an investor purchases a natural forest just after most of the trees are cut, or a plantation at the time of establishment, some considerable amount of time will pass before any return on the investment is available.

So, in simplest terms, the natural advantage of forests for investors is that they grow continually if managed and protected, and marketing them can be done at any time after they are large enough to sell. The natural disadvantage is that they can take a long time to be ready to sell.

Clever investors will avoid conditions that make it necessary to sell at the “wrong” time (when the market is down or when maximum value growth hasn’t been achieved) and will minimize the ‘carrying time” until payoff by buying forests with trees nearer maturity or by investing in intensive practices that shorten the time the forest needs to grow before revenue comes in.

Later in this space we will discuss other aspects of forests that should interest investors, including differences between plantation and natural forest investments, forest productivity, wood and non-wood forest products, and structures for investing in forests.

Acadian Timber Income Fund Pays a Steady Monthly Distribution

Acadian Timber Income Fund (ADN.UN.TO), an open-ended, limited purpose trust that manages forest land in New Brunswick and Maine, has paid a monthly distribution (like a dividend) of $C0.06875 since March 2006. Its current yield is 8.23%. More...

Forestry-Related Links of Interest

Irish Timber and Forestry - Web site includes lots of timely articles about forestry in Ireland. Check out Investing in Forestry.

Irish Timber & Forestry magazine - bi-monthly publication.

Forestry Directory of Ireland - compilation of the forestry companies, agencies and practices in Ireland.

Timber Assets Investing - slick looking marketing site promoting timber investment. Pitches a free information package.

Rock Creek Timber Partners, LP - buys, manages and sells timberland for investors. The company is headquartered in Jacksonville, Florida.

Japanese Pulp and Paper Stocks

The 14 Japanese pulp and paper companies presented here (table) give investors the opportunity to invest in the Japanese and Southeast Asian economies. The pulp and paper industry is extremely cyclical so the stock prices of these companies will rise and fall with fluctuating business cycles. More...

Votorantim Celulose e Papel Has Rewarded Its Investors But Be Careful

Votorantim Celulose e Papel (VCP), a Brazilian pulp and paper company, is not a household name in the U.S., but the stock has made lots of money for its investors. Since October 2002 VCP has increased almost 700 percent. And it pays a healthy dividend yield of over two percent.

Currently CP is down from its all-time high after completing three upside phases. And the stock may have more downside before stabilizing. So carefully watch VCP before you buy it. Like most pulp and paper stocks, VCP is very cyclical so buy it at the beginning of a price cycle, not near the end of one.

Related Articles:

buyupside.com Articles About Forestry-Related Stocks
Portfolio of Paper and Paper Products Stocks
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Price Patterns of Forestry and Paper Stocks
Price Upsides Often Occur in Three Stages
Wood Products, Paper Products and Timber Management Stocks

Wood Products, Paper Products and Timber Management Stocks

Forest products (lumber, oriented stand board, plywood and more), pulp and paper and timberland management companies (real estate investment trusts and limited partnerships) give investors the opportunity to realize capital gains and receive income from dividends and other cash distributions. Forestry-related companies produce products that are always in demand and owning stocks in these companies lets investors benefit from a growing world economy.

These companies have cyclical businesses so their stock price follow a cyclical pattern. Often their cycles do not correspond to the cycles of other economic sectors, so forestry stocks can act to even out the performance of a stock portfolio.

Many of these companies pay safe dividends so their stocks are appropriate holdings in a long-term dividend reinvestment portfolio.

Click here for a comprehensive list of forestry-related companies.

For lists of the largest forestry-related companies see S&P Global Timber & Forestry Index Tracks 25 Forestry-Related Companies and World Timber Index (TIMBEX) Tracks Timber, Forest Products and Paper Stocks.

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buyupside.com Articles About Forestry-Related Stocks
Portfolio of Paper and Paper Products Stocks
Portfolio of Forestry and Wood Products Stocks
Price Patterns of Forestry and Paper Stocks
Real Estate Investment Trusts (REITs) Stocks Pay High Dividends

S&P Global Timber & Forestry Index Tracks 25 Forestry-Related Companies

The S&P Global Timber & Forestry Index includes 25 of the largest publicly-traded companies engaged in the ownership and management of forests and timberlands. These companies produce forest products, paper products companies and manage timberland.

Click here to see the components in the index.

Related Articles:

buyupside.com Articles About Forestry-Related Stocks
High-Income Forestry and Paper Stocks
Portfolio of Paper and Paper Products Stocks
Price Patterns of Forestry and Paper Stocks
Real Estate Investment Trusts (REITs) Stocks Pay High Dividends
Wood Products, Paper Products and Timber Management Stocks
World Timber Index (TIMBEX) Tracks Timber, Forest Products and Paper Stocks

World Timber Index (TIMBEX) Tracks Timber, Forest Products and Paper Stocks

The World Timber index (TIMBEX) by Dow Jones Indexes includes the 15 largest (market cap exceeds $500 million) liquid forestry-related stocks that are engaged in producing wood products, pulp and paper products or forest land ownership (REITs). TIMBEX is market-cap weighted with no one component exceeding ten percent.

The index is useful to investors because the components are established companies with capital gains potential. And many of them pay safe increasing dividends.

But the lumber and pulp and paper industries are cyclical and so are the stock prices of forestry-related companies. So before you buy any of these stocks, be sure to study their price charts. Always buy at the beginning of price upside and avoid buying at the cyclical tops. And avoid buying on the downside of the price cycle.

Click here to see a table of the TIMBEX components.

For more information about the TIMBEX see TIMBEX current components by weightings (.pdf file) and TIMBEX brochure (.pdf file).

Related Articles:

buyupside.com Articles About Forestry-Related Stocks
High-Income Forestry and Paper Stocks
Portfolio of Paper and Paper Products Stocks
Price Patterns of Forestry and Paper Stocks
Real Estate Investment Trusts (REITs) Stocks Pay High Dividends
S&P Global Timber & Forestry Index Tracks 25 Forestry-Related Companies
Wood Products, Paper Products and Timber Management Stocks

Sino-Forest Is a China Play

Sino-Forest (SNOFF.PK), a Canadian and Hong Kong-based company that has forestry operations in China, has rewarded its shareholders. The stock has had three upside phases since 2006 yielding a five-fold increase in its price.

The company owns forest plantations from which it cuts tress for China’s pulp and paper, furniture, construction and interior decoration industries.

Like many Chinese stocks, Sino-Forest has experienced an extended price appreciation so be careful with it.

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It's Easy to Make Money on the Upside
Price Upsides Often Occur in Three Stages