Timber
No, I’m not just talking about the general
direction of the market. Last week, I made the rare
suggestion of a pairs trade involving a short of Plum Creek (PCL) against a
long position in Rayonier
(RYN). That pair typically trades in a very tight band, and it looked to be
hitting the top end of the range, which also creates a sizable gap in the
respective dividend yields. Last week, that pair narrowed 1.7% - not a bad one
week return in an otherwise tough environment.
Weyerhaeuser (WY), like
most other stocks, sold off even more and hit a new 52-week low today. WY is
currently yielding better than 4.5% and is going for under 1.5x book. It’s
probably not going to win any style points, but I think Weyerhaeuser is a good
backdoor play on timber, an asset class that a number of people I know like much
more than equities or fixed income.
Oil
A few days back, I made a post showing the divergence
between crude oil prices and the E&P
companies; since then the gap has further widened by just less than 2%. I
still haven’t seen a good explanation for the run-up in oil prices without any
such move in the stocks of the oil majors, so any suggestions would be
great.
Lenders
Right before the January rate cuts, I penned a
piece on the only
three financials worth buying, because I saw the chance for some very
well-run lenders to go into the deep discount bin on further sell-offs. Things
popped, but we’ve round-tripped back to a point where Wells Fargo (WFC), US Bancorp (USB), and American Express (AXP) are
either at or within a dollar of 52-week lows. Of the trio, I prefer AXP the most
because it’s business model differentiation; but money flow in the credit card
area has been squarely in favor of Visa (V) and Mastercard (MA) of late –
even if I think that’s misguided. The momentum is clearly behind V and MA, but I
think the price/value equation points in favor of AXP.
