Plum Creek Timber: The Case of For No Reason at All

Plum Creek Timber (PCL) is a name I have disclosed many times before as a long time holding.

The past three months have been a good microcosm for a couple of points I have tried to make before.

One is that stop orders can be tricky. PCL appears to have bottomed out, down 8% which is a magic number for a lot of people. Obviously people have success putting a stop in 8% below where they bought the stock, but I think it probably leads to a lot more trading than is necessary for most folks.

The other point is that in a diversified portfolio you never know where leadership might come from. Most of the time PCL doesn't seem to do a whole lot. Occasionally it struggles and occasionally it has a good run. I would say adding 10% or 11% versus the benchmark in a quarter is a good run. And I'm sure that when this run ends, the stock will do nothing for a while.

click to enlarge

Really I am not sure why the stock has done well. None of the recent news strikes me as market moving. The Timber ETF (CUT) listed during the quarter. It is not clear to me that the listing of the fund or the subsequent volume after listing created too much demand, but maybe that is the case.

And now to say something very obvious: Sometimes stocks go up for no real reason just as they go down for no real reason. This creates visibility for trading for no real reason.

Clearly long term success in the stock market requires some degree of patience. The stock named in this post is irrelevant. Obviously I believe in it, but there are literally thousands of other stocks that could have been substituted in. If you believe in a company, think its prospects going forward are good, and that it has done a good job of rewarding shareholders in the past, you probably just need to be patient when it goes through a stretch where it lags.

Comments

[pault2:]

Just read your article on Plum Creek. I am a long time owner of PCL for reasons you didn't even comment on. Maybe you have in the past, but this is the first time I have read your column. Plum Creek is a very special REIT and also a very special company. When the market for wood drops, Plum Creek stops cutting. What happens to the inventory? Why it just keeps on increasing. You don't find many companys anywhere where when business slows down their inventory increases at basically no cost. When Plum Creek's wood business slowed down a few years ago the management found another way to keep paying dividends. The leased out water front property they own but kept the timber rights. These are a few of the little intangables that PCL offers that I have yet to find in other companys.

2008 Jan 01 01:03 PM

[Roger Nusbaum:]

As I said in the last paragraph the stock mentioned, PCL, is irrelevant to the point I'm trying to make..

2008 Jan 01 02:48 PM

[User 135211:]

What kind of idiot is this guy? I bought some PCL at 34 and somemore at 36, and some at 40. THE STOCK KEEPS PAYING a dividend of 40 cents and now 42 cents a quarter, or now $1.68/yr. (Currently 46+) THIS HAS HAPPENED ALL ALONG FOR YEARS AND YEARS!

And this nut, this moron, watches the stock every month or week or so, and like a complete fool wants to load or unload it. HE IS A FOOL! Talk to Warren Buffett, he'll tell you when to sell, "Hopefully never."

2008 Jan 01 10:09 PM

[User 135211:]

If you pull up a five year chart of this stock, you will see that investors have been rewarded steadly. Now, I once read that real profits come out of dividends not capital gains. In the case of PCL it pays about 4%, but it has continued to go up!!!

Look at how many times you bought and sold a stock, sometimes you made a profit, but on the next one it might be a loss. ESPECIALLY THESE DAYS ITS PROBABLY A LOSS!!!! But dividends result in cash in your account and go on and on.

2008 Jan 01 10:23 PM