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Sell Deltic Timber (DEL) from my Jubak Picks 50 portfolio
02/22/2012 4:29 pm EST
When I did my annual update of my long-term Jubak Picks 50 portfolio on January 13, I dropped Deltic Timber (DEL) from the portfolio in my post http://jubakpicks.com/ but I didn’t actually remove it from the portfolio page.
I’m taking care of that today.
I dropped Deltic Timber from the portfolio not because it’s a terrible stock—it’s not—but because I wanted more exposure to the big long-term trends that would work to Deltic’s advantage than I’d get with this company.
Deltic is a relatively small timber company with 450,000 acres of timberland in Arkansas. It produces timber, lumber, and medium density fiberboard. And the company’s real estate unit sells land for commercial and residential development. The company figures that about 57,000 acres of its 450,000 fit into the higher and better use category that means they’re good candidates for the real estate market. (This land is about 12 miles from downtown Little Rock.)
You can see the potential for a company like this by looking at where it is now in relationship to where it was when the real estate bubble was still inflated. In 2011 the company sold 178,500 acres (not all higher and better use) for an average of $1,472 an acre. That was a huge increase in acres sold from the 6,200 sold in 2010. But it’s still way, way short of the 2,800,000 acres sold in 2007.
I think we’re close to bottoming in the housing market. That means that timber companies should start to see more sales of timber, lumber, and other building products, and more sales of higher and better use land at higher prices. I think that thesis will work for Deltic but I think it will work even better for a bigger timber company such as Weyerhaeuser (WY).
Which is why I added Weyerhaeuser to this portfolio on January 13 and dropped Deltic.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did not own shares of any stock mentioned in this post as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
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