I’ve already sold Rayonier (RYN) out of the Jubak Dividend Income Portfolio today, May 28. And now I’m selling it out of Jubak Picks as well. Nothing wrong with the stock—when the real estate market does finally turn, this timber and real estate REIT will do quite well. But I think that turn is still a long way away and that investors will see better places to put their money to work—most likely in the world’s emerging stock markets—before then.
I’m looking at a 2% drop in the price of a Rayonier share since I added it to the portfolio on November 9, 2007. On a total return basis—that’s capital gain (or in this case loss) plus dividend payments—I’ve got an 8.4% profit.
With this sell Jubak’s Picks will be about 33% in cash. I’m still looking to add a little more to my cash position as we move into summer and as we get closer, I believe, to the time to buy emerging market stocks. But my cash position is getting near to where I want it.
Full disclosure: I will sell Rayonier out of my personal portfolio three days after this is posted. I will also be selling Rayonier out of my Jubak Dividend Income portfolio today.
Still like the company, and glad I sold out on the same day as Jim. Would consider re-buying under 40 – though I’m still trying to grasp the case for Rayonier v Plum Creek or other timber plays.
I bought this stock on March 9, 2009 at $23.20. It just so happens that March 9, 2009 was also the day that RYN made its lowest close of the bear market at $23.02. Talk about lucky market timing!
I bought the stock mostly as a contrarian play on real estate at the time. Sentiment was at an all time low – which was my main impetus to buy. I had managed to stay out of real estate during the bubble years of 2005 – 2007, so I figured that March 2009 looked like a good time to increase my exposure to the real estate sector. The high yield, which seemed solid at the time, was a nice bonus.
For me, because of my low purchase price, the stock is still yielding 8.6%. I am also sitting on a 93% capital gain. I am neutral / slightly bearish on real estate prices over the next year. I think inventories are still too high and will continue to put downward pressure on prices. Until the jobs situation turns around and that excess inventory can be cleared out, I expect lumber demand to be low. None of this will help RYN’s stock price. In fact, I think that RYN’s stock has already priced in the turn in the real estate market – which I think may be over a year away. Higher interest rates for mortgages next year will add downward pressure on demand, but may also entice people to buy earlier to avoid a higher mortgage payment down the road.
I still agree with RYN as a fundamental play in the long term. The stock provides diversity to my commodities stocks – which are mostly based on energy, metals, and food – along with potential to profit from real estate when the market eventually turns.
Writing this response has made me think through my reasons for holding. I am tempted to continue to hold RYN, purely because of the nice dividend yield. That was my plan until writing this response. But given that I don’t see much upside for the stock price in the next year, I am now considering selling in order to rotate into a stock with more total upside (capital gains plus dividend). Until I find a compelling replacement, I will continue to hold.
Jim:
You said the real estate turn around is long way away. Do you think the same for health care REIT?
Jim:
Thanks for the cash note.