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Timber REITs: Sector Up and Down in 2011; Still Outperforms S&P

Risk management is back in vogue.  S&P’s downgrading of US sovereign debt last Friday to AA+ from AAA sparked sell-offs across world markets.  Yesterday (Monday August 8, 2011) scored Wall Street its worst day in over two-and-a-half years.  Meanwhile, how have timberland-owning REITs fared?  The good news: better than the overall market.  The bad news: it’s been a roller coaster ride there this year as well.

Year-to-date, following S&P’s downgrade on Friday August 5, 2011, the Forisk Timber REIT (FTR) Index of public timber REITs returned -0.28% versus -4.63% for the S&P 500 Index.  This is consistent with history.  While the S&P outperformed the FTR Index in 2010 (12.78% versus 8.39%), the FTR outperformed the S&P over three, five and ten-year investment periods leading up to 2011.  In other words, timber REITs performed well for buy-and-hold investors.

This year, timber REITs have bounced around.  The sector’s market cap increased nearly $5 billion in the first quarter (21.1%), and retreated 6.6% in the second quarter (see figure).  The market swoons of July and early August brought the sector, as a group, back to where we started for 2011.

To learn more about timber REIT assets, strategies and valuations, participate in the “Investing in Timber REITs” workshop on August 23rd in Atlanta.

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