Blogs I Read: Herb Greenberg

I have been reading Herb Greenberg since he was a financial columnist for the San Francisco Chronicle (yes, there was a time when I had a subscription to that paper).

I followed him to, and even ponied up $99 a year for a while for the privilege of reading his articles.

Now, he is at CBS Marketwatch, and even better, he has a blog!

You want to read Herb regularly if you are a fundamentals-based investor, and you like to read pieces about hot companies where some of the numbers may be in question.  Herb is very good about admitting mistakes, but I have to say, he’s normally very ahead of the curve with company problems.  As a result, there are quite a few CEOs out there who hate him.

Here are a couple of posts from his blog today that explain why Patrick Byrne, CEO of, hates Herb:

Overstock: It’s a conspiracy, I tell ya – a conspiracy!

More Overstock: Why Investors got Byrned. 

You might not realize it from these pieces, but Herb was writing about rising inventory levels and low turnover long before the public-facing numbers turned.

He’s fairly high on my RSS feed list.  I think if you invest in individual stocks, he should be on yours as well.

Why I love Timber as an Asset Class

I found this article on the Motley Fool this week called “Is Lumber the New Gold“, and it reminded me why Timber might be my favorite asset class of all.

I was first introduced to Timber as an asset class at Harvard Business School, in one of my classes on Venture Capital & Private Equity. Dave Swensen, who managed the Yale endowment for over 20 years, discussed the strategy that led Yale to incredible outperformance in the 1980s and 1990s. He took the endowment from $1.3 Billion to $14 Billion, using a strategy very different than his colleagues.

It would be a whole different post to sing the praises of Mr. Swensen, and his philosophy on investing has now become public knowledge since he released a book on the subject. In his discussion with the class, I remember his specific comments on assets that had extremely attractive risk/reward ratios. Private Equity is one, to be sure, but he also allocated over 20% of his funds to “real assets”, which included Timber.

Timber is fascinating as an asset class. Here is a summary, cribbed from a recent post on Seeking Alpha:

  • Excellent Returns. Annual returns of 14.5% since 1972. Better returns than any common asset class (stocks, bonds, real estate, commodities)
  • Less Volatility than Stocks. What? More reward with less risk? It shouldn’t be true, but it here at least empirically.
  • Timber is counter-cyclical with Stocks. Especially nice to have an asset that zigs when the stock market zags.
  • Money grows on Trees. Fundamentally, you have to like the fact that 6% growth every year comes from the fact that trees just grow bigger with natural sun & water. The value of trees is also non-linear, in that growers can just “not cut” in weak years for timber prices, and make even more in subsequent years.

Here’s a nice post from Seeking Alpha in July on why Timber should outperform in an inflationary market. It even features my personal favorite REIT stock in the sector, Plum Creek Lumber (PCL), which I’ve owned since 2002.

You have to love the web. I found this fantastic blog post from 2005 on Timber. Couldn’t have said it better myself.

Until recently, it was very hard to invest in timber without a portfolio allocation in the millions of dollars. However, now, there are several ways to add timber to your portfolio. My favorite are the REIT stocks, like PCL & RYN, which allow you to own companies who have a primary business in owning & maintaining timber land. Given the regulations around managing timber land, and the tax-advantages of the REIT structure, it’s hard to get better direct exposure.

It’s interesting, but as the trend continues towards development & environmental protection, these firms should have an even more compelling advantage as the supply of quality timber dwindles, and the regulatory environment grows more arduous. Even the sleepy paper companies are starting to look more valuable for the timber land that they own, rather than the product they produce.

It’s so interesting that money, in some cases, really can grow on trees.

Update (6/13/2007): A commenter forwarded me to a webpage that had a link to one of my favorite articles on timber as an ivnestment, from a 2001 issue of Smart Money magazine.  Check it out here.