Why This Timber ETF Could Grow in 2012
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, the Guggenheim Timber ETF (NYS: CUT) has earned a coveted five-star ranking.
With that in mind, let's take a closer look at Guggenheim Timber and see what CAPS investors are saying about the ETF right now.
Guggenheim Timber facts
|Total Assets||$106 million|
|Investment Approach||Seeks results that correspond to the Beacon Global Timber Index, which includes firms that own or lease forested land and harvest the timber for commercial use and sale of wood-based products.|
|3-Month / 1-Year / 3-Year Returns||(0.1%) / (20.2%) / 14.9%|
|Top Holdings with High CAPS Rating (4 or 5 Stars) and Portfolio Weight||Weyerhaeuser (NYS: WY) (4.8%)|
Rayonier (NYS: RYN) (4.7%)
Plum Creek Timber (NYS: PCL) (4.6%)
|Alternatives||iShares S&P Global Timber & Forestry Index (NAS: WOOD)|
Sources: Morningstar and Motley Fool CAPS.
On CAPS, 97% of the 39 members who have rated Guggenheim Timber believe the ETF will outperform the S&P 500 going forward. These bulls include All-Star Chemdawg, who is ranked in the top 5% of our community, and SacramentoBulls.
Earlier this year, Chemdawg summed up the Guggenheim Timber opportunity:
[Y]ou wont make a huge killing here, but you can count on its stability in a market seriously lacking it. [R]enewable and always in need... if the market price isnt high enough... just let the trees grow and wait. [I]t's idiot proof."
Guggenheim Timber, in particular, sports a portfolio whose stocks average a forward P/E of 12.5. That's lower than that of main rival iShares S&P Global Timber & Forestry (16.5).
CAPS member SacramentoBulls elaborates on the bull case:
Timber is an interesting world with the ability to hold of on harvesting a crop until the price is high enough to make it worth it. While they hold off, it grows at a nearly 10% annual rate. Thus, there are more unrealized profits.
The other interesting thing about timber is their net income ends up being higher, as they can take Long term gains on the timber since it has "been inventory for the long term".
This ETF does not track timber commodity, but the companies that business derives from timber.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of Weyerhaeuser and Plum Creek and has created a covered strangle position on Plum Creek. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.