Forestweb stock index rises 62% in 2009, outpacing S&P 500 and Dow
January 4, 2010
(Industry Intelligence Inc.)
– It was a momentous year for investors in forest products companies in 2009, with stocks bouncing back from a three-year low and more than doubling in the space of nine months. The Forestweb U.S. Forest Products Stock Index gained 62.26% from the start of the year to close at 82.25.
The index outperformed the S&P 500 and the Dow Jones Industrial indexes.
The lowest point in the history of the index, started at the beginning of 2009 but covering three years, was reached on March 9, 2009, when it hit 36.84. It rose 123.3% last year from that low.
That mirrored the situation in the broader markets when the Dow Jones Industrial and the Standard & Poor's 500 hit bottom in March. The Dow rose 3,881.00, or 59.3% from its March 9 close, while the S&P 500 rose 438.57, or 64.8%.
The S&P closed the year at 1,115.10, up 23.45%, and the Dow closed at 10,428.05, up 18.82%.
The high for Forest Products Stock Index year was 83.71 reached on Dec. 29. Despite the gain it was still more than 25 points below the three-year high of 108.76 reached on June 4, 2007.
It took almost two years for this year's high to make it back into similar territory. The high for 2008 of 94.33 was reached on Jan. 3 of that year. The index closed on Dec. 31, 2008, at 50.69. The index tracks the financial pulse of the 30 largest stocks in the forest products sector. Such companies include forestry, packaging and paper. The index is calculated using a market capitalization approach. The five biggest companies, based on annual revenue, are International Paper Co. (IP), Kimberly-Clark Corp. (KMB), Weyerhaeuser Co. (WY), MeadWestvaco (MWV) and Smurfit-Stone Container Corp.
Smurfit-Stone filed for bankruptcy Jan. 26 of last year and subsequently traded over-the-counter on the pink sheets. For most of 2009 its stock was not reflected in the index. Caraustar ended trading on Aug. 21 when it became a private company.
All companies active in the index posted percentage increases, some of which were in the triple digits.
The biggest gainer overall was a small cap stock, Boise Inc. (BZ), which rose 1,134.88% to close at $5.31/share; a year ago it was trading at $0.43. Among the larger market cap companies, Louisiana-Pacific (LPX) turned in the best performance, rising 347.44% to close at $6.98/share.
A similar upward trajectory for investors in 2010 may not develop. One analyst is concerned that much of the volume loss in the North American paper sector may remain lost forever, limiting expansion possibilities.
"I don't see a whole lot of value in the forest products space today and would expect the industry to underperform the broader market in 2010," said Daniel Rohr with Morningstar. "The North American paper sector in particular strikes me as a bit pricey."
But Rohr said he does see value in timberland and his top forest products pick for 2010 is Weyerhaeuser. "I think the market underestimates the value of the firm's incredibly well-stocked timberland in the Pacific Northwest," he said.
The U.S. Forest Products Stock Index by Forestweb is available at no charge and e-mailed each day at the close of the market to registered users who may sign up at http://my.forestweb.com/iiStockIndex.