Skip to main content

“Buying a standing forest can be more expensive than buying a share on the stock market”

The slowdown in construction in the United States and the latest tariffs have finally sent the timber sector to the wall on the stock market. Wood remains a sustainable investment, capable of surviving the generations, an attractive strategy in the face of climate change, an investment in value and yield, with the added attraction today of low valuations.

Forests play a crucial role in the accumulation of CO2, a sustainable strategy and a fairly unique investment. But on the stock market, for the last three years, the issue has been floundering, even though Wall Street indices have been breaking records by the bucketful (most timber stocks are listed on the other side of the Atlantic). For the period from May 2022 to May 2025, the wood investment theme shows a cumulative decline of around 15% if we refer to the Ishares Global Timber & Forestry Ucits ETF Wood, with 2023 being a parenthesis by being a little more drinkable. While the S&P 500 jumped nearly 40%….

Yet investment can be a bright spot in terms of performance, just as it was after the 2008 crisis. The Pictet Timber fund, the only fund managed in this theme, was launched in 2008 in the midst of the crisis and has enjoyed a good year with steady growth. The fund’s NAV has tripled in just under thirteen years (from 2008 to 2021). But since 2022, performance has been moving backwards. The entire forestry sector has been neglected, abandoned and forgotten by investors, with the result that valuations have fallen to all-time lows. So much so, that the last high made by the Ishare Global Timber and Forest Ucits ETF Wood was in May 2022, a long time ago..

“Valuations have fallen to the levels seen in 2008, during the great subprime crisis, and even lower for some of them. Today, these stocks are seen solely as producers of timber,” explains Christophe Butz, founder of the Pictet Timber fund.

It’s cheaper to buy a forest on the stock market..

Even the new aspect and potential of placing wind turbines or fields of solar collectors in these immense expanses is not taken into consideration. Some forestry companies held in the Picter Timber fund, which sometimes own thousands of hectares, are currently valued (net asset value) at a discount of 30 to 50% to the value of the forests they own (compared with the private equity market). In other words, shares in Weyerhaueser, Rayonier and Potlatchdeltic would cost 1.5 times more if their forestry assets were valued at 100%. It would even be twice as much for Acadian… Conversely, buying one of these forests would actually cost 1.5 to 2 times as much..

However, these companies, which own forests, combine an operation linked to the forest, to wood, which has been forgotten in the current development. Invest in the entire forestry sector, from planting trees and forests to processing wood to meet the needs of construction, industry and private individuals, “Buying a standing forest is more expensive than buying a share in one of these forestry companies,” says Christophe Butz.

Reasons for underperformance

This underperformance can be explained by the nature of its shares. This sector is doubly punished, firstly because they are value stocks (as opposed to growth stocks) and secondly because these forestry stocks are often small/mid caps. These are two investment families that have received little attention in recent years. In the end, it’s as if the trees had stopped growing in the forests of these owners of listed shares over the last three years.

Another reason for this glaring underperformance probably lies in the enthusiasm surrounding AI, which has all but wiped unsexy themes such as forests off the investment table. The idea of investing in forestry has fallen out of fashion and is being swept under the carpet by investors. As a result, the performance gap between the market and the timber sector has widened significantly, and the elastic has rarely been so tight, says Christophe Butz.

Forestry remains a noble investment. Wood is an extremely versatile resource. It is an excellent building material and is also used as the basis for a wide variety of packaging, hygiene and heating products. Trees play a major role in combating climate change by absorbing and fixing carbon. Sustainably managed forests help to protect soil and water sources, as well as promoting biodiversity.

The last rebound was up by almost 90%

Christophe Butz is confident: “The good thing is that the market is changing. In general, this theme tends to outperform precisely when this difference between growth and value stocks reaches excessive levels, as is currently the case. The very last time there will be such a gap will be just after the pandemic in 2020. And from May 2020 to May 2022, the ETF rebounded in a straight line by around 90% (including more than 70% in one year, from May 2021).

The companies in the top 10 of the Pictet Timber fund fully express investment. The first three are large forest owners (Weyerhaeuser, Rayonier, Potlatchdeltic), all located in North America. Another major weighting and star of the fund is Sweden’s Svenska Cellulosa, owner of 2.7 million forestry assets in Sweden and the Baltic States, specialising in the production and marketing of paper and wood.

This fund is mainly focused on the real economy, and more than 20% of stocks have market valuations below real assets/liquidation values. It is also worth noting that the Pictet Timber fund is much more focused on ownership of the underlying forest and the timber value chain than the more paper-focused S&P Global Timber and Forestry ETF (over 20% by weight).

Sustainably managed forestry operations represent the fund’s primary investment segment. The strategy invests in the entire timber industry: wood-based products, packaging board, timber construction, hygiene products, etc The fund is overexposed to North America (around 60% in the United States and Canada) and Northern Europe (around 15% in Finland and Sweden).

All in all, the portfolio of the highly original Pictet Timber fund (Pictet AM) can boast a carbon footprint that is not just zero, but negative. Attention: Contrary to expectations, the fund has higher volatility than its benchmark, the MSCI ACWI.

Daniel Pechon

Author Daniel Pechon

More posts by Daniel Pechon

Leave a Reply