September Idea of the Month: Cutting into the World’s Steadiest Asset Class

By gumshoe, September 18, 2011

Sometimes when the economy is worrisome, the markets tumultuous, and no “story” stocks get you particularly excited about near-term catalysts, it’s time to focus on beaten down asset classes that you can buy for cheaper prices — it may not be the low for these assets, of course (and it probably ain’t, I’m not that lucky), but these are things you want in your portfolio and buying them cheaper can’t be all bad. This goes for the relatively inexpensive high-dividend multinationals that seem absurdly cheap these days, the household name stocks like Johnson and Johnson (JNJ), Intel (INTC) and Apple (AAPL) — I own those second two — and many others. As I said last month, the easy decision for those stocks for folks who don’t like to do stock picking is just to buy DTN or a comparable large cap, dividend focused ETF (in this case, I happen to like DTN because it excludes financials and weights by dividend, but I don’t actually own shares of that particular fund).

But it’s not large-cap dividend payers I want to talk about today — at least, not in a broad way. There’s one particular asset class that I think has come down in price because it’s an economically sensitive sector, but the long-term performance has been so solid and steady that I think it’s still the kind of ballast that fits most portfolios: trees.

It’s finally OK to buy timber again.

Timber has been the strongest asset class, by some measures, over the last several decades — we’ve seen that the run in most hard assets has been long and strong for very many years, of course, but timber stands alone as having been more stable than any other major asset class … and, an important distinction, is neither a depleting resource like mining or energy nor a perishable one like most agricultural commodities. Timber stocks have followed the stock market to some degree, taking a huge tumble during the crash in 2008 and 2009 and bouncing back, but they are also largely depressed from historical valuations because of the continued weakness in demand for lumber in the United States … which I think might present an opportunity for carefully selected stocks in the business.

There are several ways to get access to timber — there are two ETFs, CUT and WOOD, which both have a substantial portion ...

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