X, The only problem I have with shorting Weyerhauser is the price. The negatives you mentioned are already in the share price, or very close to it. Yes, it is selling at 24 times eps, which is high, especially with year ahead eps looking lousy. But, this is more of an asset play than an earnings play.
Weyerhauser has never been a well-managed company while I've been in the business. But, somewhere in its history, it bought a huge amount of great timberland and murdered lots of spotted owls. <G> There problem is basically the Japanese log trade. The Japanese import US logs to turn into wooden edifices. They don't even want low quality US firms turning the logs into boards. <G> Obviously, with the tough times in Japan, building is not exactly on the upswing.
However, where are we in that Japanese cycle? IMHO, as the dollar falls off a cliff, logs become more affordable to the Japanese. And given their land prices, logs are a small part of the total equation. They could start gearing up again or, more likely, just stop declining, at any time and Weyerhauser is leveraged to that change.
To make a long story short (too late!!!!!!!!! <G>), I am no fan of Weyerhauser, but I think you are jumping into a short near the tail end of the down cycle. The stock has fallen 30% for the very reasons you have stated. It may have further, but I think that is a bet where the odds are not stacked in your favor right now. It is more of a coin flip.
MB |
