By Brad Thomas and Michael Boyd
Sometimes, you’ve got to switch it up to keep your portfolio properly diversified. That’s why this isn’t the first time we’ve sung the praises of buying into alternative asset classes.
When people think of real estate investment trusts (REITs) – if they think of them at all – they tend to conjure images of apartment complexes, shopping centers, and office buildings. To be sure, those are valid investment vehicles with significant diversification potential.
But they’re not the end-all, be-all in this regard.
There are studies showing the portfolio-strengthening capabilities of also buying into timberland, infrastructure, and data center REITs as well. For the record, this is also true when it comes to less common categories of precious metals and the like.
When done right, they simultaneously lower risk and raise returns. And that’s why we’re willing to at least evaluate Weyerhaeuser(WY).
Though we should start by saying that there have been reasons to criticize this timberland REIT before. For instance, some of previous CEO Doyle Simpson’s choices weren’t as wise as we would have liked.
In many ways, he chopped the company down to a more suitable size. Yet he also put too heavy a focus on the business’ wood products segment, resulting in some nausea-inducing volatility.
Unfortunately, that kind of thing can happen when you’re dealing with manufacturing products on top of raw material… just one reasons why our pure timberland play, CatchMark Timber Trust (CTT), is outperforming Weyerhaeuser.