Hurricane Investment Prep: Timber ETFs

In the wake of Hurricane Harvey and in anticipation of Hurricane Irma, some investors have been paying renewed attention to timber and forestry exchange-traded funds. The dominant names in that group are the Guggenheim MSCI Global Timber ETF CUT and the iShares Global Timber & Forestry ETF WOOD.

Last week, CUT and WOOD rose 4.1 percent and 4.8 percent, respectively, with CUT, the Guggenheim offering, hitting an all-time high on Friday. WOOD, the iShares ETF, is up nearly 21 percent year-to-date while CUT is higher by 19 percent.

WOOD “is the larger of the two funds, having debuted in June of 2008 and the ETF traded at a new 52-week high just yesterday [Sept. 7] before tailing off a bit. The fund only averages about 16,000 shares traded daily on a one-month trailing basis, so it is not exactly a popular or heavily trafficked fund,” said Street One Financial vice president Paul Weisbruch in a note out Friday. 

Inside The Timber ETFs

WOOD, which recently turned 9 years old, has $286.1 million in assets under management. The ETF tracks the S&P Global Timber & Forestry Index and holds 26 stocks. WOOD is a global ETF with U.S. timber names accounting for 40.3 percent of the fund's weight. Canada, Brazil and Japan combine for over a third of the ETF's geographic exposure.

CUT follows the MSCI ACWI IMI Timber Select Capped Index. That benchmark “is designed to measure the performance of securities that are engaged in the ownership and management of forests and timberlands and production of finished products which use timber as raw material. The index captures large, mid and small-cap stocks across 23 developed markets countries and 23 emerging markets countries,” according to Guggenheim.

CUT holds 77 stocks, or nearly triple the size of WOOD's roster. U.S. stocks account for almost 44 percent of the ETF's weight with Finland and the U.K. combining for 18 percent.

More Attention

It is possible that WOOD and CUT “could certainly become active given the headlines regarding the devastating weather and the inevitable rebuilding process that will take place,” said Weisbruch. “WOOD has seen respectable inflows year-to-date, to the tune of about $31 million in while CUT has seen modest outflows of about $10 million.”

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Image Credit: Hurricane Matthew, public domain