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
Be a smarter, better informed investor.
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.
-
Snowbirds: Avoid These 3 Sneaky Insurance IssuesBefore snowbirds depart for their winter retreat, they should check their insurance coverage for surprises that might arise, or else be on the hook for repairs.
-
Hang in There With This Value FundPatience is required for investors in the Dodge & Cox Stock Fund, but its long-term outperformance proves it's worth the wait.
-
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.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have TodayUNH stock was a massive market beater for ages — until it wasn't.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
