In this piece, we will take a look at the 13 best land and timber stocks to invest in. If you want to skip our overview of the timber and forestry industry as well as the latest trends and news, then you can take a look at the 5 Best Land and Timber Stocks to Invest in.
Humanity's ability to transform materials to meet transportation, industrial, lodging, and other needs is the reason why modern day society can cover vast distances in a matter of hours and have access to modern day luxuries such as non stop electricity and warm water. One of the earliest materials that's been used for energy and lodging is food, and today, it's part of the global forestry industry that operates under constant scrutiny by environmental activists.
While we have moved from wood fired steam powered engines to modern day internal combustion engines and electric motors, wood still plays a crucial role in the global economic output. One of the largest users of wood is the construction industry, and consequently, wood stocks often fluctuate in response to global economic trends. The construction industry does well when interest rates are low as developers can fund their projects and buyers are comfortable with raising substantial amounts of capital for their pricey purchases.
If you've been following Insider Monkey regularly then you'll know that right now, the global economy is far from peachy. While America has remained an exception amongst advanced nations with its economic growth, other major economies such as Germany and China have struggled. The Chinese slowdown in particular isn't great for land and timber stocks since its massive construction industry and sizable population is one of the biggest consumers of wood.
The current economic slowdown started in 2022 after the Russian invasion of Ukraine led to rising inflation worldwide and forced central banks to rapidly hike interest rates. This meant that businesses and consumers, already feeling the pinch of inflation, had to further tighten their belts when it came to spending since they could not borrow money as easily as possible before the rate hikes. One way to see how this monumental shift in the global economic framework affected land and timber stocks is to see how funds that invest in such equities have performed over the past couple of years.
One exchange traded fund that tracks the performance of land and timber stocks is the iShares Global Timber & Forestry ETF. Looking at its 2022 performance, the fund started to drop right on cue as the rate hikes started and it became clear to investors that neither inflation nor high interest rates going anywhere. Between April and September 2022, a period marked by consecutive interest rate hikes and record setting inflation, this ETF dropped by 27%, which was just a handful of percentage points shy of its performance during the coronavirus stock market crash of 2020.
However, while it dropped by September 2022, the land and timber stock ETF recovered soon afterward and has maintained its performance trends in 2024. Over the past twelve months, the ETF is up by 11%, and its year to date performance is also indicative of how stocks pegged to economic health typically perform. This is because the fund only dipped in April after the inflation data in the U.S. hit the newswires. This data set was one of the more consequential ones that we've seen this year, since it forced investors to move their interest rate cut expectations forward. Naturally, for stocks, this wasn't optimal, and the timber ETF which was up by 3.24% year to April 11th, is down by 4.6%.
As to what the hedge funds believe is in store for land and timber stocks, here's what Third Avenue Management had to say about one of the more well known land REITs, Rayonier Inc. (NYSE:RYN), as part of its Q4 2023 investor letter:
Rayonier (a U.S.-based Timber Real Estate Investment Trust or “REIT”) announced the disposition of 55k acres of timberlands in Oregon for $242 million, implying $4.4k per acre, or more than two times the implied value per acre for Rayonier’s portfolio based upon the recent stock price. Rayonier’s management team has also indicated that it plans to sell another $750 million of timberlands within the next 18 months to further reduce debt levels and return excess capital to shareholders given the price-to-value discrepancy. In addition, Lennar Corp. indicated that it is marketing for-sale its multifamily portfolio, which is comprised of 38 properties in 15 states with 11.4k units that should be highly coveted given the sub-markets and modern vintage. To the extent a transaction is effectuated, it is estimated that Lennar would generate more than $1.0 billion of net proceeds, which would not only surface value from this overlooked vertical, but likely be returned to shareholders via share repurchases.
With these details in mind, let's take a look at some top land and timber stocks. A couple of notable names are Weyerhaeuser Company (NYSE:WY), Mohawk Industries, Inc. (NYSE:MHK), and MasterBrand, Inc. (NYSE:MBC).
13 Best Land and Timber Stocks to Invest in
Aerial view of Timberland Real Estate Investment Trust's woodlands in the U.S. South and Pacific Northwest.
Our Methodology
To make our list of the best land and timber stocks, we first sifted through specialty REITs and identified those who work in the land and timber industry. Then, we ranked these companies as well as furniture and other timber stocks by the number of hedge funds that had bought the shares in Q4 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
PotlatchDeltic Corporation (NASDAQ:PCH) is a real estate investment trust that holds more than two million acres of timberland. Its shares are rated Buy on average, and the average analyst share price target is $52.14.
12 out of the 933 hedge funds covered by Insider Monkey's Q4 2023 research had bought and owned PotlatchDeltic Corporation (NASDAQ:PCH)'s shares. Israel Englander's Millennium Management was the biggest shareholder due to its $25 million investment.
Along with Mohawk Industries, Inc. (NYSE:MHK), Weyerhaeuser Company (NYSE:WY), and MasterBrand, Inc. (NYSE:MBC), PotlatchDeltic Corporation (NASDAQ:PCH) is a top land and timber stock that hedge funds have bought.
West Fraser Timber Co. Ltd. (NYSE:WFG) is a Canadian company headquartered in Vancouver, Canada. It makes and sells lumber and finished wood products. A slow economy all around has also affected the firm's income statement, as it has missed analyst EPS in two out of its four latest quarters.
16 out of the 933 hedge funds covered by Insider Monkey's Q4 2023 research had invested in West Fraser Timber Co. Ltd. (NYSE:WFG). Len Kipp and Xavier Majic's Maple Rock Capital was the biggest shareholder through its $23.3 million stake.
Patrick Industries, Inc. (NASDAQ:PATK) makes and sells shelves, countertops, cabinets, and other associated lumber and wood products. The shares are rated Buy on average, and the average analyst share price target is $119.13.
During last year's fourth quarter, 17 out of the 933 hedge funds profiled by Insider Monkey had bought and owned the firm's shares. Patrick Industries, Inc. (NASDAQ:PATK)'s largest hedge fund investor is Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital due to its $29.9 million investment.
UFP Industries, Inc. (NASDAQ:UFPI) is a sizeable American wood production company headquartered in Grand Rapids, Michigan. It sells treated lumber, wood composites, and other associated products. A diversified firm, its packaging subsidiary expanded its operational footprint in March 2023 by opening a new facility in Wisconsin.
As of December 2023 end, 18 hedge funds among the 933 that were part of Insider Monkey's database had invested in UFP Industries, Inc. (NASDAQ:UFPI).
Simpson Manufacturing Co., Inc. (NYSE:SSD) is a mid sized American company that makes and sells wood products used by the construction industry. Like some of its peers, the firm is also struggling on the financial front as it has missed analyst EPS estimates in two out of its four latest quarters.
For their fourth quarter of 2023 shareholdings, 19 out of the 933 hedge funds covered by Insider Monkey's research were the firm's shareholders. John W. Rogers's Ariel Investments owned the biggest stake in Simpson Manufacturing Co., Inc. (NYSE:SSD) which was worth $78.6 million.
American Woodmark Corporation (NASDAQ:AMWD) is a furniture company headquartered in Winchester, Virginia. The firm is busy expanding its global presence in 2024 and opened a new plant in Mexico for a $45 million price tag in April 2024 for this purpose.
After digging through 933 hedge fund portfolios for last year's final quarter, Insider Monkey found that 19 had bought American Woodmark Corporation (NASDAQ:AMWD)'s shares. Richard S. Pzena's Pzena Investment Management was the firm's largest shareholder as it owned $57.4 million worth of shares.
Number of Q4 2023 Hedge Fund Shareholders: 19 Texas Pacific Land Corporation (NYSE:TPL) is an oil and gas company headquartered in Texas. It also has a significant land management division through which the firm manages acres of land in Texas and uses it for revenue generation. February and March 2024 were busy months for the firm as it secured a favorable court ruling for a stockholders agreement and announced a stock split following which the shares are trading near the $600 mark. As of December 2023 end, 19 out of the 933 hedge funds profiled by Insider Monkey were the firm's shareholders. Texas Pacific Land Corporation (NYSE:TPL)'s largest stakeholder in our database is Murray Stahl's Horizon Asset Management as it holds $2.1 billion worth of shares.
MillerKnoll, Inc. (NASDAQ:MLKN) is one of the biggest furniture companies in the world. Its shares tanked by 18% in March 2024 after the firm reported hefty revenue drops during its third quarter of fiscal year 2024 and missed analyst estimates for all of its latest quarter financials.
Insider Monkey scoured through 933 hedge fund holdings for 2023's December quarter to discover that 19 had invested in the firm. MillerKnoll, Inc. (NASDAQ:MLKN)'s biggest hedge fund investor is Noam Gottesman's GLG Partners since it holds a $14.8 million stake.
Weyerhaeuser Company (NYSE:WY), MillerKnoll, Inc. (NASDAQ:MLKN), Mohawk Industries, Inc. (NYSE:MHK), and MasterBrand, Inc. (NYSE:MBC) are some top hedge fund land and timber stock picks.
