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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (54477)	11/13/2014 7:33:31 AM
From: Paul Lee	Respond to of 78627

RYN/RYAM from Richard Band's newsletter The news is less encouraging at Rayonier Inc. (NYSE: RYN). On Monday, the timberland REIT announced it had found a "material weakness" in its accounting, necessitating a restatement of Q1 and Q2 results, and a revision to the 2013 Form 10-K. The company also pared its quarterly dividend by 17%, to 25 cents a share. Previous management, it turns out, had overstated RYN's inventory of merchantable timber. In addition, for about a decade, the company had overharvested trees in the Pacific Northwest. To correct the problem, a lengthy period of underharvesting will be required. I'm confident that the new management team at RYN has matters in hand, and that the lower dividend rate will prove sustainable. However, it's clear that RYN's long-term value has been impaired to some degree. If you're in the stock primarily for the dividend, and you're satisfied with the reduced level of income (as compared with competing vehicles), you can hang on to Rayonier. Over the next 12-18 months, though, I don't expect much, if any, appreciation in the stock. On that basis, I'm assigning RYN a sell rating and deleting it from the model portfolio. What about Rayonier Advanced Materials (NYSE: RYAM), spun out of RYN last June? Although, strictly speaking, there's no connection between RYN's issues and RYAM, the dodgy accounting at RYN took place while Paul Boynton, now CEO of RYAM, was in charge at RYN. The market, understandably, is putting RYAM shares in the penalty box as well. At only 10X the past 12 months' earnings, most of the downside in RYAM would seem to be already wrung out. Thus, I'm willing to hold the stock for now. We're monitoring the spinoff shares as a Niche Investment outside the model.