About one year ago, I talked about how to grow your money on trees. The timber stock I liked was PCL, which was at $39. Now it is at about $46, a nice 17% gain with an additional 3.9% dividend. Compared with the overall market, it has beaten S&P500 by a wide margin.
As I said, timber is, over a long period of time, a very stable commodity with a solid uptrend. In the past 20 years, the timberland index has been up annually almost 15%. In other words, this kind of growth will double your money every 5 years. If you put your money in S&P500, your annualized gain would only be less than 10%. Timber could also cushion you during the tough economic time. For example, timber gained over 2 times when stocks plunged over 90% during the Great Depression. More recently, timber gained almost 10% in 2008 when S&P500 lost nearly 40%.
I think timber stocks will continue to appreciate and be doing well for years. In the US, housing is definitely recovering and starts to pick up. It is no-brainer that timber will be demanded more if the housing market is doing well. China is also recovering in general and their demand will be enhanced substantially as well.
I will use any weakness of the market to either initiate or add to the existing positions of PCL or other timber stocks and hold them for long term, also enjoying their high dividends.
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