D.R. Horton, Inc. (DHI), KB Home (KBH), And How This Industry’s Getting Chewed From Both Ends

The Foolish bottom line
If all these companies are going to be hurt by the declining supply of healthy trees and the rising demand for their wood, who benefits? Timber REITs, basically. While the beetles are damaging their inventory, there are still ready buyers for the wood, whether it’s homebuilders, power utilities, or humble paper companies.

Weyerhaeuser Company (NYSE:WY) and Plum Creek Timber Co. Inc. (NYSE:PCL) have seen sales go up almost 20% in the past three years, and margins are strong. Weyerhaeuser and Plum Creek both get a significant amount of their business from the sale of whole logs, manufactured wood, and pulp, making them key suppliers to the increasing demand from different industries. Plum Creek is in a particularly good position, as much of its assets are in the eastern half of the United States, which has been less affected by the beetle.

It’s never a good situation when industries are hungry for a resource in the middle of a natural disaster affecting that resource, but it is one investors can profit from. I’ve spoken before of the benefits of owning timber REITs, and this is an ideal time.

The article This Industry Is Getting Chewed From Both Ends originally appeared on Fool.com.

Fool contributor Jacob Roche and The Motley Fool have no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.