We recently published a list of The 10 best land and timber stocks to buy according to hedge fundsIn this article, we will look at how Weyerhaeuser Company (NYSE:WY) compares to other land and lumber stocks.
The agricultural and wood industry supports various sectors such as construction, furniture manufacturing and paper production. The industry is estimated to be worth $342.55 billion in 2024 and is expected to reach $464.94 billion by 2029, growing at a healthy compound annual growth rate (CAGR) of 6.3%. In fact, the World Bank predicts that the drive to net-zero emissions could quadruple global wood demand by 2050.
This growth is driven by an increasing preference for wooden buildings over concrete buildings as wooden structures produce very little waste and save time. In addition, concerns about the carbon emissions of the construction industry, which accounts for 36% of total emissions worldwide, have led to the use of wood instead of steel and concrete. This is because wood’s role as a low-carbon alternative in construction helps decarbonize the industry. In addition, wood’s natural ability to absorb CO2 makes it a more sustainable solution for the construction industry.
In addition to construction, wood is also used as firewood and for industrial purposes. In Africa, Asia and South America, about 90% of wood is used as fuel, while in North America 90% and in Europe 80% of wood is used for industrial purposes.
The rapidly increasing demand for wood raises a critical question: how can we ensure a long-term supply? Unlike fossil fuels, trees are renewable, but their growth is slow, taking 30 to 100 years. Sustainable practices are based on establishing new plantations, but finding suitable land is becoming increasingly difficult due to competition from other uses. Currently, most wood comes from natural forests: softwoods in the north and hardwoods in the south. But this dependence is not sustainable.
Although plantations only make up 3% of the world’s forests, they already account for 50-60% of wood production. With the increasing demand for wood comes the responsibility to practice environmental protection. According to Gresham House’s forestry manager, a sustainable wood supply is only possible with well-managed plantations. Certification programs such as the Forest Stewardship Council (FSC) can help ensure responsible forest management and protect biodiversity and ecological functions.
Over 200 million hectares of forests worldwide are FSC certified, demonstrating a growing commitment to sustainability in the industry. This number is expected to rise to 300 million hectares by 2026. In addition, increasing consumer preference for certified wood products is driving demand for responsibly sourced wood. Another solution to align the growing demand for wood products with sustainable forest management practices is investing in reforestation. Initiatives such as the Bonn Challenge aim to restore 350 million hectares of degraded land by 2030.
Our methodology
To shortlist the best land and timber stocks according to hedge funds, we drew on Insider Monkey’s extensive database of 920 hedge funds (as of Q1 2024). We selected the land and timber stocks with the highest number of hedge fund investors. Why do we care about the stocks hedge funds invest in? The reason is simple: our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, outperforming its benchmark by 150 percentage points (More details can be found here).
A wide angle shot of a lush green forest surrounding a logging facility.
Weyerhaeuser Company (NYSE:WY)
Number of main fund holders: 32
Weyerhaeuser Company (NYSE:WY), a forestry giant founded in 1900, has a dominant position in the industry. The company manages a massive 11 million acres of U.S. forest land and operates responsibly according to international standards. The company also operates beyond the U.S. borders and owns additional Canadian forests with long-term licenses.
Weyerhaeuser Company (NYSE:WY) first quarter 2024 results showed adjusted EBITDA increased to $352 million from $321 million a year ago. Looking ahead, the company is positioned for long-term growth. Its strategies include a 5.3% base dividend increase and a new carbon capture agreement that underscores its environmental focus. Weyerhaeuser Company (NYSE:WY) believes strong housing and repair markets, as well as its diverse asset portfolio, position it well for future success.
Analysts are moderately optimistic about Weyerhaeuser Company (NYSE:WY), with a consensus rating of Moderate Buy. The average price target is $38, which represents a potential upside of 30.85% from current price levels.
Of the 920 hedge funds Insider Monkey tracked at the end of the first quarter of 2024, Weyerhaeuser Company (NYSE:WY) was held by 32 hedge funds, making it one of the best land and lumber stocks to buy, according to hedge funds.
Total WY 4th place on our list of the best land and timber stocks to buy. You can visit The 10 best land and timber stocks to buy according to hedge funds to see the other land and timber stocks that are on hedge funds’ radar. While we recognize WY’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than WY but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: Analyst sees a new $25 billion ‘opportunity’ for NVIDIA and Jim Cramer recommends these 10 stocks in June.
Disclosure: None. This article was originally published on Insider Monkey.
