In this article, we are going to discuss the 10 best land and timber stocks to buy according to hedge funds. You can also check out the 10 Best Artificial Intelligence Stocks to Buy Under $10 here.
The land and timber industry supports various sectors such as construction, furniture manufacturing, and paper production. The industry is forecasted to be worth $342.55 billion in 2024 and is projected to reach $464.94 billion by 2029, reflecting a healthy compound annual growth rate (CAGR) of 6.3%. In fact, The World Bank predicts that the push for net zero emissions by 2050 could quadruple global timber demand.
This growth is fueled by a rising preference for wooden buildings as compared to concrete buildings since wooden construction produces very little waste and saves time. Moreover, concerns regarding CO2 emissions by the construction industry, which make up 36% of total emissions globally, have led to the adoption of timber in place of steel and concrete. This is because timber’s role as a low-carbon alternative in construction helps decarbonize the industry. Furthermore, wood’s natural ability to absorb CO2 makes it a more sustainable solution for the construction industry.
In addition to construction, timber is also used for wood fuel and industrial purposes. Around 90% of wood is used for fuel in Africa, Asia, and South America primarily, while 90% of wood in North America and 80% in Europe is utilized for industrial purposes.
The skyrocketing demand for timber raises a critical question: how can we ensure a long-term supply? Unlike fossil fuels, trees are renewable, but their growth is slow and takes 30 to 100 years. Sustainable practices rely on establishing new plantations, but finding suitable land is becoming difficult due to competition from other uses. Currently, most timber comes from natural forests: softwoods in the north and hardwoods in the south. However, this reliance is unsustainable.
Although plantations make up only 3% of the world’s forests, they already provide about 50-60% of timber production. With the increasing demand for timber comes the responsibility to practice environmental stewardship. According to the Managing Director of Forestry at Gresham House, relying on well-managed plantations is needed for a sustainable timber supply. Certification programs like the Forest Stewardship Council (FSC) can help ensure responsible forest management, protecting biodiversity and ecological functions.
Over 200 million hectares of global forests are FSC-certified, demonstrating a growing commitment to sustainability within the industry. This number is expected to reach 300 million hectares by 2026. Moreover, consumers’ growing preference for certified wood products is driving the demand for responsibly sourced timber. Another solution for balancing the growing demand for timber products with sustainable forest management practices is investment in reforestation. Initiatives like the Bonn Challenge aim to restore 350 million hectares of degraded land by 2030.
A wide shot of lush green forestry surrounding a timber harvesting facility.
Our Methodology
To shortlist the best land and timber stocks to buy according to hedge funds, we relied on Insider Monkey’s extensive database of 920 hedge funds as of Q1 2024. We picked the land and timber stocks with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Land and Timber Stocks to Buy According to Hedge Funds
10. American Woodmark Corporation (NASDAQ:AMWD)
Number of Hedge Fund Holders: 22
American Woodmark Corporation (NASDAQ:AMWD) is a leading furniture manufacturer based in Winchester, Virginia.
In the first quarter of fiscal 2024, American Woodmark Corporation (NASDAQ:AMWD) reported a significant increase in net income. The company reported a net income of $37.9 million compared to $20.1 million in the same quarter of the previous fiscal year, even as revenue saw a YoY decrease of 8.1%. This $17.8 million rise in net income can be attributed to improvements in manufacturing efficiency, a stabilized supply chain, and reduced overhead spending. American Woodmark Corporation’s (NASDAQ:AMWD) net profit margin stands at 5.91%.
Analysts have a “Moderate Buy” rating on American Woodmark Corporation (NASDAQ:AMWD) stock. The average price target for the stock stands at $108, suggesting a potential upside of 35.42%. This price target range is between $100 and $116 per share.
Overall, 22 hedge funds were long American Woodmark Corporation (NASDAQ:AMWD) as of Q1 2024. Pzena Investment Management is the leading hedge fund investor in the company, with a stake worth over $54.8 million as of the first quarter of the year.
9. Boise Cascade Company (NYSE:BCC)
Number of Hedge Fund Holders: 24
Boise Cascade Company (NYSE:BCC), founded in 2004 and headquartered in Boise, Idaho, is a one-stop shop for builders across the United States and Canada. It operates in two main areas, namely, wood products manufacturing and building material distribution.
In Q1 2024, the company’s net income rose to $104.1 million from $96.7 million in the previous year, translating into a 1.12% increase in net profit margin. Earnings per share also climbed to $2.61 from $2.43. Sales figures showed a similar upward trend, reaching $1.6 billion compared to $1.5 billion in Q1 2023. Overall, Boise Cascade’s first-quarter results indicate a positive financial performance.
Analysts are generally optimistic about Boise Cascade Company’s (NYSE:BCC) future prospects. Based on ratings from 6 Wall Street analysts in the past 3 months, the average price target for the stock stands at $139.75, representing a potential upside of over 14% from the current price levels. The predictions range from a low of $129 to a high of $160 per share.
Here’s what Miller Value Partners said about Boise Cascade Company (NYSE:BCC) in its Q4 2023 investor letter:
“During the fourth quarter, we eliminated two positions comprising approximately 6% of the portfolio where new information suggested that our investment thesis was wrong. As active managers, we are able to proactively make adjustments in the portfolio, a key difference from strategies that are rebalanced to a benchmark on a set frequency. Two new additions included a starter position in wood products maker Boise Cascade Company (NYSE:BCC) as well as the debt of Gray Television, a top operator of local television stations. We think Boise Cascade is a good business trading at a compelling valuation with a fortress balance sheet, while we believe markets are too pessimistic on Gray Television’s staying power.”
Boise Cascade Company (NYSE:BCC) is one of the best land and timber stocks to buy according to hedge funds.
8. Texas Pacific Land Corporation (NYSE:TPL)
Number of Hedge Fund Holders: 24
Texas Pacific Land Corporation (NYSE:TPL), established in 1888 and headquartered in Dallas, Texas, is engaged in land management across a vast area exceeding 880,000 acres in West Texas.
Texas Pacific Land Corporation’s (NYSE:TPL) first quarter of 2024 recorded a 32.2% year-on-year increase in net income to $114.4 million. This translated into a net profit margin of 65.7%, up 11% from the last year. Furthermore, revenue rose to $174.1 million, driven by a $10.7 million or 31.3% jump in water sales.
Analysts have given a consensus “Moderate Buy” rating on Texas Pacific Land Corporation (NYSE:TPL) stock. The average price target stands at $741, suggesting a potential upside. Overall, 24 hedge funds reported owning a stake in Texas Pacific Land Corporation (NYSE:TPL) as of Q1 2024. Horizon Asset Management was the leading hedge fund investor in the company.
Here’s what Horizon Kinetics LLC said about Texas Pacific Land Corporation (NYSE:TPL) in its Q4 2023 investor letter:
“An important tipping point was reached in many portfolios last year. It took a half-dozen years and is the result of one of the two greatest positive forces in investing: compounding. We’re not referring to the very visible Texas Pacific Land Corporation (NYSE:TPL) position. That is the product, for older-vintage accounts, of 10 to 15 years of compounding. The greater the weight a successful strategic position like that becomes, the more volatile a portfolio will be, since an individual stock will vary more than a portfolio of stocks.
In 2022, TPL was visibly responsible for such accounts appreciating substantially during a year when the stock market was down substantially. In 2023, TPL was responsible for those accounts declining modestly while the market was up substantially.
What wasn’t very visible is that, after a half-dozen years of compounding, a second strategic position in older-vintage accounts also achieved an important critical mass. Its appreciation in the final quarter of 2023 substantially offset the TPL decline during the period. 10 This is the Grayscale Bitcoin Trust (GBTC). In rough terms, averaged across the group of such accounts, its 80% appreciation offset about three-quarters of the 33% decline in TPL..” (Click here to read the full text)
7. MasterBrand, Inc. (NYSE:MBC)
Number of Hedge Fund Holders: 25
MasterBrand, Inc. (NYSE:MBC) is a leading North American manufacturer specializing in a wide range of residential cabinets for kitchens, bathrooms, and other areas of the home. The company distributes its products through three primary channels: dealers, retailers, and builders ensuring widespread availability across the United States and Canada.
According to its Q1 2024 results, MasterBrand, Inc. (NYSE:MBC) delivered a strong operational performance. Adjusted EBITDA reached $79 million, translating into an EBITDA margin of 12.4%. This represents a 40-basis point increase year-over-year, driven by cost-saving initiatives. Furthermore, MasterBrand, Inc. (NYSE:MBC) reported an EPS of $0.29, beating the estimates by 16%. The company has surpassed EPS estimates in the last 4 quarters.
MasterBrand, Inc. (NYSE:MBC) has received an average price target of $20, reflecting a potential upside of over 37% from the current price levels. At the end of Q1 2024, MasterBrand, Inc. (NYSE:MBC) was held by 25 hedge funds, making it one of the best land and timber stocks to buy now.
6. Rayonier Inc. (NYSE:RYN)
Number of Hedge Fund Holders: 27
Rayonier Inc. (NYSE:RYN), is a major player in the timberland real estate investment trust (REIT) market. The company owns valuable assets in prime locations for growing softwood timber across the U.S. South, Pacific Northwest, and New Zealand. As of December 31, 2023, the firm’s substantial holdings totaled roughly 2.7 million acres. This includes 1.85 million acres in the U.S. South, 418,000 acres in the U.S. Pacific Northwest, and 421,000 acres in New Zealand.
Rayonier Inc.’s (NYSE:RYN) first-quarter earnings report revealed that, excluding legal settlements and pension charges, adjusted pro forma net income increased to $7.0 million or $0.05 per share, up from $1.1 million or $0.01 per share in the same quarter of the previous year.
Furthermore, Rayonier Inc. (NYSE:RYN) maintained strong financial performance with an operating income of $16.2 million and Adjusted EBITDA of $56.2 million. Cash flow also remained positive at $52.3 million.
Two Wall Street analysts have offered 1-year price targets for Rayonier Inc. (NYSE:RYN), averaging $34. This suggests a potential upside of 12.9% from the current stock price.
Here’s what Third Avenue Management said about Rayonier Inc. (NYSE:RYN) in its Q4 2023 investor letter:
“Asset Sales: Rayonier Inc. (NYSE:RYN) (a U.S.-based Timber Real Estate Investment Trust or “REIT”) announced the disposition of 55k acres of timberlands in Oregon for $242 million, implying $4.4k per acre, or more than two times the implied value per acre for Rayonier’s portfolio based upon the recent stock price. Rayonier’s management team has also indicated that it plans to sell another $750 million of timberlands within the next 18 months to further reduce debt levels and return excess capital to shareholders given the price-to-value discrepancy.”
5. Howard Hughes Holdings Inc. (NYSE:HHH)
Number of Hedge Fund Holders: 32
Howard Hughes Holdings Inc. (NYSE:HHH), a Texan real estate giant, manages a diverse portfolio. It owns and operates established properties like shopping centers and apartments, while also focusing on long-term development through Master-Planned Communities (MPCs) in cities like Las Vegas, Houston, and Phoenix.
Howard Hughes Holdings Inc. (NYSE:HHH) is currently constructing One Bridgeland Green, the first mass timber office building in greater Houston. Situated within the 70-acre mixed-use development Village Green at Bridgeland Central, this Class A office space will cover around 49,000 square feet.
Howard Hughes Holdings Inc. (NYSE:HHH) recently reported its first-quarter 2024 results, maintaining its full-year guidance for key segments like Master-Planned Communities (MPCs) and condo sales. The company anticipates a profit of $300 million before taxes from MPCs, $250 million in net operating income (NOI) from its operating assets, and $700 million in condo sales with a profit margin of 29%.
Furthermore, there was improved performance in office and multi-family properties, resulting in a 7% increase in total operating assets NOI. New home sales also saw a significant rise of 24% compared to the same quarter of 2023.
There is a consensus Buy rating from analysts for Howard Hughes Holdings Inc. (NYSE:HHH) stock. The average price target stands at $86.67. This suggests that analysts believe the stock price has room to grow. Howard Hughes Holdings Inc. (NYSE:HHH) ranks on our main list of the best land and timber stocks to buy according to hedge funds.
Here’s what Pershing Square Holdings said about Howard Hughes Holdings Inc. (NYSE:HHH) in its Q4 2023 investor letter:
“Howard Hughes Holdings Inc. (NYSE:HHH) delivered strong business performance in 2023, highlighting the high-quality nature of its well-located master-planned communities (“MPCs”) and resilient business model.
In its land sales segment, the company generated a record $341 million in full-year profits. New home sales in HHH’s communities, a leading indicator of future land sales, increased an impressive 45% in 2023. The surge in new home sales continues to be driven by a significant shortage of resale housing inventory as existing homeowners are reluctant to give up their low-rate mortgages. This dynamic has led to robust homebuilder demand against a backdrop of limited supply of vacant lots in HHH’s MPCs. The resulting supply-demand imbalance has supported strong pricing growth with the company’s average price per acre for residential land sold exceeding $1 million in Q4 2023, up 22% year-over-year, a record-high milestone for the company…” (Click here to read the full text)
