Wednesday, January 28, 2015

Seeking Alpha: Plum Creek Timber Getting A Little More Respect

As Top Ideas go, my September 2013 call on Plum Creek Timber (NYSE:PCL) has been a dog. The stock is up from that initial report, but investors would have much better with Weyerhaeuser (NYSE:WY) or Potlatch (NASDAQ:PCH), let alone any number of stocks outside of the timber space. If there's a silver lining, it's that this dog has fewer fleas now, as the shares have rebounded more than 10% off the October 2014 low and continue to offer a decent yield.

This coming year is not likely to be dramatically better. Plum Creek's management is looking for growth in housing starts, but new household formation remains worryingly low and new opportunities like wood fuel pellets are not going to create major dislocations in the demand for pulpwood. On a more positive note, the public market valuations of companies like Plum Creek are starting to better reflect the value of timberlands indicated by actual transactions and management has expressed a willingness to sell non-core timberland at the higher private values and use the funds to repurchase shares below net asset value.

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Plum Creek Timber Getting A Little More Respect

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