Seeking Alpha: Plum Creek Timber Biding Its Time

Maybe the nicest thing I can say about Plum Creek Timber (NYSE:PCL) since my last update is that investors in this timberland REIT fared better than those invested in Weyerhaeuser (NYSE:WY), Potlatch (NASDAQ:PCH) or lumber/wood product producers like West Fraser (WFT.T) or Canfor (CFP.T). The basic underlying problem will be familiar to many investors - housing starts aren't recovering to the extent expected around the beginning of the year, Asian demand has been weaker than expected, and prices for Northwestern and Southern logs haven't improved as much as hoped.

If you've been interested in Plum Creek for some time, nothing has really changed. The bull thesis on Plum Creek centers around the idea that management can drive more value by intensive management of the timberland resources (better planting and harvesting decisions), sell higher-value properties, and leverage an eventual housing recovery. Bears can argue that Plum Creek doesn't have enough leverage to value-added manufacturing, that higher-value sales will disappoint, and that the slower/shallower housing recovery will limit price recovery.

I continue to believe that Plum Creek is likely undervalued on a long-term net asset value basis (which assumes "fair" prices well below prior peaks), but not so much so that this is a must-buy. I think this remains a credible stock for investors interested in income, but this is not the sort of situation where management excellence can neutralize an underwhelming operating environment.

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Plum Creek Timber Biding Its Time