🤑247capital #16 | $WY🤑
Follow-Up, Stock Brothers $WY, Tweets of the Week, ...
Hi Everyone 👋,
Welcome to the #16 issue of 247capital — your weekly source of Investment Research. If you are new, you can join my email list here.
The follow-up to former Issues
Below you´ll find the overview of all bought shares since Issue 1 and the current state. Please keep in mind we´re here for the long run. 5-10 years horizon at least.
$TAP - bought at $44.95 - Issue 1
Closed the week at $59.96 (up 33.39%)🔥
$GEO - bought at $5.79 - Issue 7
Closed the week at $7.40 (up 27.81%)🔥
XTRA:DFV - bought at 12.96€ - Issue 8
Closed the week at 13.50€ (up 4.17%) 🔥
READ - bought at 43SEK - Issue 12
Closed the week at 40.32SEK (down 6.23%) ❄️
$HIMS - bought at $8.95 - Issue 12
Closed the week at $12.21 (up 36.42%)🔥
$GEO was “unfortunately” last week’s WSB play; hopefully, it won`t affect the stock negatively long-term.
Readly is a potential buy for this week if it goes under 38.70SEK, 10% below our first tranche.
Stock Brothers - Weyerhaeuser Company - $WY
Share price: $35.32 * Market Cap: $25.7B * EPS: 1.77 * P/E Ratio: 19.93 * Div: 1.94%
Monday, June 14th, 2021 - Florian is back with some new research.
Dear Newsletter Subscribers,
First of all, I would like to thank you for the many positive letters forwarded to me by Sebastian. I was very pleased about your feedback.
In the GEO Group (GEO) stock analysis, I have already discussed political conditions and ideological changes of direction.
Again and again, I notice with our newsletter readers and in my private environment that people let themselves be influenced by the media and negative influencers. My concern is to give readers confidence and a positive view of the world. Although, of course, there are crises, the world is not free of conflicts, however, and this is an important realization, at least for me, is that as an investor, you have the opportunity to put your capital where one considers the soil, i.e., the investment, to be fertile and meaningful.
How high the individual sum, i.e., the amount of money invested, does not matter. In my eyes, it is much more important that one understands in which business model one is investing and to have a longer-term investment horizon in mind. Any investment with a holding period of less than one year falls under the category of trading.
Basically, trading has an important function on the stock exchange since many traders ensure a high level of liquidity on the stock exchange. This allows you to get your money back at any time.
However, my personal strategy is long-term unless something fundamental changes. There is also the well-known quote: "Time in the market beats timing the market."
Today I would like to discuss a company that is personally worth a closer look at for several reasons. First of all, a short note about my person, professionally I have a well-founded education and, based on this, a degree in forestry and timber industry. To mention this at this point is important for our readers for 2 reasons.
On the one hand, this explains why I pursue a longer investment horizon, and on the other hand, I did not come by chance. Secondly, I did not come across a company from this industry by chance. I would not like to withhold another short excursion into my world of thoughts from you...
A farmer who runs a farm that specializes in cereals such as wheat or barley, for example, has a horizon of one year. Why is that?
The farmer sows the seeds in the field in spring and harvests in summer. In the fall, the field is plowed to promote nutrient exchange in the soil, and in the winter, the field rests. Thus, the forester who plants an oak tree will not be the one who, after about 100 years to cut down the tree and harvest the wood.
So why does the forester plant the tree, even though he can no longer harvest it himself? This is part of the generational contract because the logger harvests were also not planted by him because of the tree. This principle is called sustainable forestry and originated in Germany.
Today's company is Weyerhaeuser (WY). The company was founded around 1900 by a German emigrant named Friedrich Weyerhäuser in the USA.
Wikipedia has the following to say about it:
"As an 18-year-old immigrant, he started as a laborer in a sawmill, which he later purchased. He also began to acquire shares in many other lumber companies, some of which were majority stakes. In 1872, he established the Mississippi River Boom and Logging Co. an alliance, which handled all processed logs on the Mississippi River. In 1900, Weyerhäuser purchased from J. J. Hill 364,000 acres of timberland in the Pacific Northwest, thus establishing the Weyerhäuser lumber company. Weyerhäuser never changed the names of the companies he controlled. One of the 30 mills in which he owned an interest was Potlatch, later Potlatch Corporation. He also owned shares in the Boise Cascade Corporation. The company Weyerhaeuser is still the world's largest lumber seller."
So what is the basic idea of the business?
Process wood, own the raw material, and expand massively. The good things are often just as simple as they are ingenious.
What is the current situation, what makes this company so interesting?
Weyerhaeuser is a company with a long history, which means that it has known its production processes for more than 120 years. Conversely, one must even say that this company has been on the market for over 100 years and its products are not a fad. They are also not subject to any social zeitgeist.
We can discuss whether to go on vacation on a cruise ship, or whether you have to watch sports on TV. But there is one non-negotiable lowest common denominator!
Every one of us wants a roof over our head that offers protection from wind and weather. So Weyerhaeuser does not sell any interchangeable product but offers the basis for a place of retreat, namely our home. So you should have taken a look at the company.
How large is the sales market?
In the USA, about half of all houses are built for a maximum of 200,000 US dollars. For this price, there is no alternative to wood construction. So every 2nd customer in the USA who decides to build a house is a buyer of the manufactured products. In addition, the average age of American real estate is currently 40 years. Therefore many repairs have to be carried out, for which also different wood products are manufactured by Weyerhaeuser.
OSB and MDF boards are mentioned here. I will, of course, link you to a video on OSB production. How large is the managed forest area?
The company states the following:
Our Timberlands segment manages 10.7 million acres of private commercial timberlands in the U.S. We own 9.9 million of those acres and control the remaining acres through long-term contracts. In addition, we have renewable, long-term licenses on 14.1 million acres of Canadian timberlands.
Since we use a different unit of measurement in Germany, I have converted the forest land into square meters. If you want to convert, I have attached the link below.
9.9 million acres are over 40 billion square meters. At first, I thought the number could not be correct, but it really is such a large area. (Please do the math yourself).
The area that Weyerhaeuser calls his property is larger than the whole of Baden-Wuerttemberg and corresponds to more than 10% of the area of the Federal Republic of Germany. That's a moat in the most original sense!!!
Does the company pay dividends?
Since the company has the Reit status, parts of the profits are distributed quarterly in dividends. You can find more information in the appendix below.
Conclusion
The stock has recovered after the Corona shock and is currently at a little over $35. An entry price below $30 would be great, but here's what you need to know:
Q1 2021 was the quarter with the best EBITDA in the company's history, which is now over 120 years old. Compared to Q4 2020, this is a 68% increase.
So it is quite possible that due to the focus on sustainable companies, coupled with the commodity boom, especially in the wood sector, the stock will no longer fall below $30.
Here's what I'm going to do, stay cool and don't get into a flurry of panic. Money always comes to the patient and $WY on my watch list. The stock went above $41 since the low last year and is currently undergoing a small correction. Perhaps the downward movement will still go below $30, but if not, there are other options.
We investors are free from pressure and have the reins in our own hands. As I mentioned above, if the time horizon is many years, then logically, the entry does not happen in the current trading week.
If you like the newsletter, feel free also to recommend it to others.
Would you like me to continue the "wood series" and present more companies from this industry? Then just hit reply.
Talk to you soon, Florian.
… I have one more small addition.
Although this is not a so-called tech company, here is my question to you:
Which was the first U.S. company to export to the People's Republic of China in 1974? Would you have named Weyerhaeuser first? 😉
Here, too, my thesis is correct: everyone wants a roof over their head that protects them from wind, weather, and danger. This thesis is not only valid in the USA and Europe but also worldwide.
Resources:
https://investor.weyerhaeuser.com/#stock-data
https://de.wikipedia.org/wiki/Friedrich_Weyerh%C3%A4user
https://investor.weyerhaeuser.com/sec-filings
https://www.unitjuggler.com/area-umwandeln-von-acre-nach-m2.html?val=9900000
https://de.wikipedia.org/wiki/Liste_der_deutschen_Bundeslaender_nach_Flaeche
https://investor.weyerhaeuser.com/2021-05-13-Weyerhaeuser-Company-Declares-Dividend-on-Common-Shares
https://investor.weyerhaeuser.com/download/WYQ12021EarningsFullRelease.pdf
https://de.wikipedia.org/wiki/Weyerhaeuser
Quote of the Week
“The three biggest addictions are heroin, carbs, and a stable paycheck.”
- Nasim Taleb
Tweets of the week
Interesting numbers 🤔👇🏻
Some extra liquidity for Starbucks to play with 😳👇🏻
This one is for Florian; Nr. 3 is Canon, by the way 😉👇🏻
Company names of the week - G
This is a list of company names with their name origins explained.
Today's Top 5 letter G:
Garmin – named after its founders, Gary Burrell and Dr. Min Kao
GEICO – from Government Employees Insurance Company
Glaxo – a dried-milk company, set up in Bunnythorpe, New Zealand, by Joseph Edward Nathan. The company wanted to use the name "Lacto," but it was similar to some already in use. The company says: "By adding and changing letters, Glaxo's name evolved and was registered in October 1906." GlaxoSmithKline was a 2000 merger of Glaxo Wellcome and SmithKline Beecham.
Google – originally an accidental misspelling of the word "googol" settled upon because google.com was unregistered. Googol was proposed to reflect the company's mission to organize the immense amount of information available online.
Gucci – named after its founder, Guccio Gucci, who became familiar with high-class luggage while working as a lift boy at the Savoy Hotel in London. He returned to Florence and started making travel bags and accessories, founding the House of Gucci in 1921.
Got Feedback, Questions, or Suggestions? Just Hit Reply; I’d love to hear your comments.
Thanks for reading, and until next Monday,
Sebastian from 247capital
