The market lacked direction May 4, but that didn't stop Weyerhaeuser (WY) stock from shooting up 5.7% to close at $82.62. It's not the financial performance of the big forest products company that's driving the shares. Weyerhaeuser reported weak earnings, mainly due to the recession in housing. No, investors are betting the lumber company will be carved up and will be worth much more as a sum of its parts than as one tree.
Weyerhaeuser management announced May 4 that it is considering a sale of its containerboard, packaging and recycling unit. The company recently spun off its fine paper business but retains part ownership. And Wall Street is pressuring the company to create a real-estate investment trust from its six million acres of timberland. Forming a REIT would reduce Weyerhaeuser's taxes and presumably offer a more enticing dividend yield to investors.
Russell Croft, co-manager of Croft-Leominster Value (CLVFX), notes that Weyerhaeuser is just about the last remaining public owner of timberland assets that has not announced plans to separate the ownership of timber assets from that of paper and pulp and other operations. If management does hoist a buzz-saw and cut the corporation into parts, what's it worth?
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Croft, who holds Weyerhaeuser shares, thinks the timberland alone could easily be worth $12 billion. Add the branches of business such as containerboard, homebuilding, wood products and the value of wood-cutting rights, and he gets to a roughly $30 billion break-up value for Weyerhaeuser. Deduct debt, and he figures the company's worth $100 to $110 a share -- a 20% to 32% premium to its closing price May 4.
-
'Humbug!' Say Consumers, Despite Hot GDP: Stock Market Today"The stock market is not the economy," they say, but both things are up. Yet one survey says people are still feeling down in the middle of this complex season.
-
The SEC Is Concerned for Older Investors and Retirement Savers. Here's What You Should KnowThe SEC focusing on older investors, retirement and college savers, and private securities. Here's how those changes impact you.
-
Vesting, Catch-Ups and Roths: The 401(k) Knowledge QuizQuiz Test your understanding of key 401(k) concepts with our quick quiz.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
-
What the Rich Know About Investing That You Don'tPeople like Warren Buffett become people like Warren Buffett by following basic rules and being disciplined. Here's how to accumulate real wealth.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have TodayBank of America stock has been a massive buy-and-hold bust.
-
If You'd Put $1,000 Into Oracle Stock 20 Years Ago, Here's What You'd Have TodayORCL Oracle stock has been an outstanding buy-and-hold bet for decades.
-
How to Invest for Rising Data Integrity RiskAmid a broad assault on venerable institutions, President Trump has targeted agencies responsible for data critical to markets. How should investors respond?
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have TodaySherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
