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ETF Chart of the Day: Timber Talk

ETF Chart of the Day: Timber Talk | Timberland Investment | Scoop.it
WOOD (iShares S&P Global Timber & Forestry, Expense Ratio 0.47%) is the larger of the two alternatives here, with approximately $289 million in assets under management.

The fund invests in thirty six individual equities that operate in the timber and forestry industry, with top four holdings rounding out as follows: PCL (8.27%), WFT (8.11%), WY (8.05%), and RYN (6.91%). PCL, WY, and RYN are technically “REITs” that operate within the timber and forestry industry, while WFT for example is classified as “Paper and Forest Products.”

CUT (Guggenheim Timber, Expense Ratio 0.70%) debuted earlier than WOOD in 2007 instead of 2008 respectively, but has since lost its edge in assets under management comparatively, as the fund currently has about $191 million.

We see twenty eight individual names in the underlying CUT basket, with a mix of U.S. listed equities as well as a handful of ordinary shares listed internationally. Top holdings at the moment are MWV (4.95%), UPM-Kymmene Oyj (4.79%), Oji Holdings Corp. (4.79%), Mondi Ltd. (4.78%), and Smurfit Kappa Group PLC (4.71%).

Neither of these funds trades heavy daily volume typically as WOOD averages about 19,000 shares traded daily while CUT’s ADV is about 44,000 shares. However, based on the respectable asset levels in these funds, it is
evident that investors are using these funds as niche “buy and hold” allocation type strategies.
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Alternatives: Money does grow on trees

Alternatives: Money does grow on trees | Timberland Investment | Scoop.it

Forestry has long been viewed as a store of wealth for the super-rich, but over the last few years there has been a growth in opportunities for retail investors to get exposure to this asset class. But is it something that is ever suitable for ordinary retail investors? And if so, who is it suitable for, what role does it play in a portfolio and what is the best way to access it?


The demand for timber is forecast to grow. Overall statistics are hard to obtain owing to the global nature of the market and the amount of illegal logging that takes place, but some facts are clear: population and economic growth are driving demand for timber, particularly in emerging economies.
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Historically, global timber prices have increased by an average of 6 per cent per year for over 100 years, and there is no reason to assume the long-term trend won’t continue, albeit with short term variation.
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Ordinary retail investors who want daily liquidity, low minimum investments, low transaction costs, and the assurance that comes with investing in a regulated environment must stick to mainstream investments in either listed funds or investment trusts that have some exposure to forestry or exchange traded funds.


ETFs will typically track either the ‘Beacon Global Timber Index’ or the ’S&P Global Timber & Forestry Index’. Both measure the performance of companies operating within the sector whose activities include owning or managing forests, harvesting trees or producing other timber-based products - so it’s not a ‘pure’ exposure to forestry. Only the very largest, listed companies are tracked and therefore there’s a higher degree of correlation to mainstream markets. The two largest ETFs are the Guggenheim Timber ETF and the iShares S&P Global Timber & Forestry Index fund.


ETFs will give investors some exposure to the sector with the benefits of liquidity, transparency and regulation. They will spread across a number of firms and sectors and diversify away and specific company risk. This is the option for ordinary retail investors.


However, more sophisticated investors might choose a more specialist route. Direct investments or specialist funds will provide a more pure exposure, the potential for much higher returns (and greater diversification. Investors who do go into this segment of the forestry market can still mitigate risks by thorough research and picking the right investment.

Sam Radcliffe's insight:

Count me as skeptical that "global timber prices have increased by an average of 6 per cent per year for over 100 years"...

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The Great Timber Debate (And How To Play It)

The Great Timber Debate (And How To Play It) | Timberland Investment | Scoop.it

The U.S. housing market recovery has been under way for the past year, but analysts believe there could be a lot more upside when considering how much the sector fell. While mortgage stocks and homebuilders are the most popular plays on sector, timber recently entered the limelight in 2012. However, many analysts remain divided on its potential in 2013.

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ETF in Focus: Guggenheim Global Timber (CUT)

ETF in Focus: Guggenheim Global Timber (CUT) | Timberland Investment | Scoop.it

Investors looking for exposure to the global timber industry can do so through Guggenheim Global Timber (CUT). This industry is very diversified and many firms are themselves vertically diversified, from owning timberland to paper mills. Some firms, such a Rayonier (RYN), which is 4.80 percent of CUT’s assets, are REITs. Other firms may not be designated as REITs, even though they own millions of acres of timberland.


Generally speaking, higher timber prices will lead to higher profits for these firms, but while higher timber prices are good for timberland and wood, it can hurt the profits of paper mills. And as we’ve seen with gold miners in the past year, stocks are not the same thing as commodities. A commodity can rise in value, but if the cost of operating rises faster than the commodity, firms can become less profitable.


Currently working in timber companies’ favor is positive investor sentiment, inflation and a pickup in U.S. new home construction. REITs such as RYN have been performing well since 2008 because of their solid yields, but the global timber ETFs only started performing well once the rest of the sector joined in.


CUT enjoys strong momentum at the moment and this could help the fund outperform in a bull rally as momentum investors join in. However, past performance shows that with several moving parts, the fund has trouble benefiting from narrow trends. Investors looking to play a specific trend, such as rising timberland prices, rising wood prices, rising paper prices, etc., will do better to focus on individual shares. This also means that the strongest factor impacting the fund may be investor sentiment, something that is difficult to predict and can change quickly.

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Investing: Healing housing may lead economy back

Investing: Healing housing may lead economy back | Timberland Investment | Scoop.it

How can you invest in the housing resurgence? First, bear in mind that if you own a house, you probably have enough exposure to the housing market as it is. But if you think housing has a future, you could consider:


  • Lumber. The price of 1,000 board feet of framing timber is $356.50 on the CME futures exchange, up from $249.30 a year ago. Guggenheim Timber ETF (CUT) invests in timber stocks; it's up 17.9% this year.
  • Concrete. There's no concrete ETF, but Cemex (CX) is the world's largest cement producer. You'd better believe earnings will increase to buy the stock at its current price. But if U.S. construction does improve, earnings will soar, and the stock should do well.
  • REITs. Real estate investment trusts, or REITs, invest in commercial properties – apartments, offices, even storage units. REIT dividends are already taxed at ordinary income tax rates, so they should be somewhat immune from any fiscal cliff-related tax increases on dividends. The average equity REIT yields about 3.4%.


Any bet on a housing rebound depends on a rising economy, and currently, the economy is being held hostage by our elected officials. Should Congress resolve the fiscal cliff, however, the prospects of a housing rebound seem bright – and so do the prospects for the stocks that might prosper from that rebound.

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Timber ETFs: Rebuilding After Hurricane Sandy

Timber ETFs: Rebuilding After Hurricane Sandy | Timberland Investment | Scoop.it

Lumber prices reached a 19-month high Wednesday as traders anticipated a spike in demand to repair the damaged homes situated in Hurricane Sandy’s path.

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Most Chicago Mercantile Exchange lumber futures hit the daily trading limit of $10 per thousand board feet and halted trading at those levels on Wednesday, with the benchmark January futures adding a little over 3.0% to end at $331.2. Lumber futures are trading relatively unchanged Thursday at $331.1.

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While ETF investors can’t directly gain exposure to lumber futures, investors can follow timber equities through the Guggenheim Timber ETF (NYSEArca:CUT) and the iShares S&P Global Timber & Forestry Index Fund (NYSEArca: WOOD).

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Hedge Timber Exposure Against Inflation

Hedge Timber Exposure Against Inflation | Timberland Investment | Scoop.it

There's something to be said for looking outside the box in terms of considering including asset classes in your portfolio. In the past, I've espoused the potential benefits of exposure to water, as one example.


Timber, a positive in portfolio construction, has historically had low correlations with more traditional asset classes, is another outside-the-box item


As an asset class timber has outperformed the S&P 500 over a bevy of time periods, and several challenging market environments, typically with a lower level of risk than equities.

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Timber ETFs Head-to-Head: CUT vs. WOOD

Timber ETFs Head-to-Head: CUT vs. WOOD | Timberland Investment | Scoop.it

With the housing market seemingly showing some green shoots, many are growing more optimistic that we have seen the bottom in this important sector. Prices are starting to slowly trend upwards in some markets while home sales levels, while nowhere near their peak, are comfortably above the lows that they experienced during the dark days of 2008-2010.


This trend has been especially welcomed new for ETFs targeting the building and construction industry as these funds have been among the top performing products from a year-to-date look. In fact, the iShares Dow Jones US Home Construction ETF (ITB) is up an impressive 66% since the start of the year, suggesting that at least for those in this industry, the recovery is definitely underway in the housing sector.

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Currently, there are two ETFs tracking the broad timber equity market, the Guggenheim Timber ETF (CUT) and the iShares S&P Global Timber & Forestry Index Fund (WOOD). These funds have both added a little over 12% so far in 2012, nothing to be ashamed of, but obviously nowhere near what investors have seen in some of the key home construction ETFs either.

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Yet, investors should note that while CUT and WOOD both have a focus on the timber industry, there are some slight differences between the two products. While either could make for a good choice to play a timber price boom, we have highlighted some of the key disparities between the two ETFs...

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Yorkville Plans 2 More MLP ETFs

Yorkville Plans 2 More MLP ETFs | Timberland Investment | Scoop.it

Yorkville ETF Advisors, a New York-based asset manager, put two more ETFs focused on master limited partnerships in the regulatory pipeline just a month after it launched its Yorkville High Income MLP ETF (NYSEArca:YMLP).

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YMLC will be a composite portfolio and invest in MLPs involved with everything from mining and production to transportation and retail marketing of natural resources such as petroleum products, natural gas, timber, fertilizers and coal.


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Specialty REITs for the housing recovery with inflation protection

With positive signs that the housing market is starting to recover and the possibility of higher inflation in the coming years, income investors should take a look at REITs specializing in timber.


With strong US and Asian demand pushing up prices, stocks such as Weyerhaeuser (WY), Rayonier (RYN), and Plum Creek Timber (PCL) will be big winners. An alternative to purchasing individual stocks in this sector is buying shares of the Guggenheim Timber ETF (CUT). Here is a discussion of each timber stock.

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Technician's view of timber sector

Technician's view of timber sector | Timberland Investment | Scoop.it

We technicians know that price will lead the fundamentals and so perhaps the strength in the forest sector is telling us two things – a recovery in the US housing sector and increased global demand for lumber.

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iShares Global Timber & Forestry Breaks Below 200-Day Moving Average

iShares Global Timber & Forestry Breaks Below 200-Day Moving Average | Timberland Investment | Scoop.it

In trading on Thursday, shares of the iShares Global Timber & Forestry ETF (Symbol: WOOD) crossed below their 200 day moving average of $51.55, changing hands as low as $51.53 per share. iShares Global Timber & Forestry shares are currently trading down about 1.3% on the day. The chart below shows the one year performance of WOOD shares, versus its 200 day moving average.


Looking at the chart above, WOOD's low point in its 52 week range is $45.84 per share, with $54.32 as the 52 week high point - that compares with a last trade of $51.92.

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Time For Timber? 25-Year Gain Crushes S&P 500

Time For Timber? 25-Year Gain Crushes S&P 500 | Timberland Investment | Scoop.it

When it comes to commodities, gold and energy typically bubble up as the go-to ways to add some alternative asset class diversification to a portfolio. Thing is, you’re typically in for a feast or famine experience, depending on global demand (for oil) and the global zeitgeist (for gold). - See more at:

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If you’re intrigued by the idea of adding a commodity sleeve to your portfolio, timber is an often overlooked commodity worth consideration. First off, it’s a renewable resource. Can’t say that about gold or (most) energy. It’s also got a flexible harvesting schedule. You can’t keep corn in the ground if prices soften. A benchmark timber index had an annualized gain of more than 12% from 1987 through 2012, compared to the S&P 500’s annual gain of just below 10%.


Coming out of the market low in March 2009, the SPDR Gold Share ETF (GLD) hasn’t been half as productive an alternative investment as the two largest timber ETFs, Guggenheim Timber (CUT), and iShares S&P Global Timber and Forestry (WOOD).

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For a more direct stake, you can take a look at Real Estate Investment Trusts that own forestland. Weyerhaeuser (WY), which converted from a mish-mosh of paper-related business to a full on REIT in 2010, is a major holding in both ETF portfolios. The company just announced it will pay $2.65 billion to buy more land that will increase its Pacific Northwest timber acreage by 33% to more than 6 million acres. (Pacific timber has a faster route to Asian emerging markets than southern timberland.) At the same time, Weyerhaeuser says it’s considering a sale or spinoff of a home-building subsidiary. The net takeaway: it’s doubling down on direct timber ownership and looking to cash out of a main consumer of said timber.

Granted a forward PE ratio north of 20 isn’t exactly a bargain, but that’s well below Weyerhaeuser’s recent highs.

Management announced it plans to finance the deal by issuing more equity and debt. As a little company research shows, Weyerhaeuser’s debt-to-equity ratio is below 1.00; that makes it far more stable than Plum Creek Timber (PCL), but it’s still more leveraged than the other major U.S. timber REIT, Rayonier (RYN), which operates in the Southern states.

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George Fisher January 2013 Market Comments | Bullish on Timber

George Fisher January 2013 Market Comments | Bullish on Timber | Timberland Investment | Scoop.it

The best performing commodity of 2012 was – Timber. According to an article published on cnbc.com, timber prices rose 40% on the spot market and 49% in the futures market, as reported by trade publication Random Lengths. The strength came from a 20% increase in housing starts and higher than normal Asian demand coupled with reduced supply. While the Mountain Pine beetle continues to reap havoc on Canadian timber harvests, many US timber companies are currently harvesting above sustainable levels. While these same firms reduced harvests in 2008 through 2010 to below sustainable levels, creating a “bank” for higher future harvests, it is important for investors to analyze the sustainability of current harvest levels. Once the “bank” is consumed, harvests will be reduced to long-term sustainable amounts. This information is usually available in the footnotes of annual and quarterly shareholder reports. Offsetting the eventual production declines will be the added pressure on supply, fueling higher commodity prices in the future.


However, with the outperformance in 2012, the timber futures markets seem to be demonstrating a bit of backwardation where current spot prices are higher than futures, reflecting traders belief in potentially lower commodity prices as the year progresses. The timber sector has been strong over the past two years and stocks trade at valuations more commonly found during mid-cycle economic conditions. Most timber companies are structured as Real Estate Investment Trusts (REITs) with a “nice” dividend yield. However, reflecting on historical yields, share prices seem expensive. Dividend increases over the next few years will be driven by continued improvement in profitability. The same could be said for the two Timber ETFs that are popular among investors. Expect more positive press releases in the timber sector as housing continues its slow climb out of the abyss of 2008 and stronger timber profits are reported. Buying on market weakness would be preferable but nibbling on starter positions at the current level should be considered.


Keep in mind timber as a commodity has historically been considered an inflation hedge. However, as the largest use of timber is construction, especially residential, the fortunes of timber companies are quite cyclical and directly fused to the hip of housing starts. As a core equity holding, there are several timber companies offering both growth and income for long-term investors. 2013 should be the year timber exposure is added to portfolios.

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Commodities ETFs Narrow Their Focus

Commodities ETFs Narrow Their Focus | Timberland Investment | Scoop.it

Exchange-traded funds give investors an easy way to place bets covering a broad array of assets at once. But in the commodities sector, as with other asset classes, there are now funds dedicated to increasingly narrow market slices.

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Why do niche funds appeal to some investors?


They can give investors targeted exposures, while still providing diversification.


For instance, iShares S&P Global Timber & Forestry WOOD -0.73% holds shares in companies such as International Paper Co. and Packaging Corp. of America, as do other iShares commodities funds. But unlike those other funds, the timber ETF doesn't hold shares in oil companies or gold miners.

"We are attracted to the timber and forestry market because of the diversification benefits it provides," says Dennis Johnson, chief investment officer at Comerica Asset Management, which manages $25 billion and invests in the timber ETF, according to SEC filings. He says timber's value doesn't move in tandem with Comerica's other alternative investments, such as private equity and emerging-markets currencies.

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IndexIQ’s IQ Global Resources ETF (GRES) Receives 5-Star Overall Morningstar Rating

IndexIQ’s IQ Global Resources ETF (GRES) Receives 5-Star Overall Morningstar Rating | Timberland Investment | Scoop.it

The IndexIQ Global Resources ETF (NYSEARCA:GRES), the first global resources hedged Exchange-Traded Fund, has received a 5-Star Overall Morningstar RatingTM and a 5-Star Three-Year Morningstar RatingTM as of November 30, 2012 out of 22 funds in the Natural Resources category, it was announced today.


“The last three years have seen tremendous growth in demand for commodities worldwide”


Introduced on October 27, 2009, GRES is the broadest commodities and natural resources ETF, including: livestock; precious metals; grains, food and fiber; energy; industrial metals; plus timber, water, and coal. It is based on an index with over five years of live history, designed to reweight its allocations to individual commodity sectors monthly. The fund is diversified both geographically and by sector. We believe GRES offers a unique and market proven methodology and has been among the highest performing ETFs in the commodities and natural resources category during its more than three years of live history, as well as exhibiting among the lowest levels of volatility in its category.

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ETF Chart of the Day: Timber

ETF Chart of the Day: Timber | Timberland Investment | Scoop.it

The iShares S&P Global Timber & Forestry (NasdaqGM: WOOD) is the largest in terms of assets under management at $182 million currently, followed by Guggenheim Timber (NYSEArca: CUT) which has about $150 million invested.


WOOD, while only averaging about 19,000 shares traded on an average daily basis, is composed of reasonably well-known, and liquid underlying companies including WY (9.66%), RYN (8.95%), PCL (8.60%), WFTBF (6.03%), and PCH (5.24%).

The complexion of the basket is slanted about 52% towards U.S. domestic companies, with the remaining 48% invested in European, Latin American, Asian, Canadian, and African based companies in this industry.


WOOD has a “mid cap” bias, with approximately 53% of the underlying index being invested in mid cap names.


CUT tracks the Beacon Global Timber Index, and averages about 58,000 shares traded daily. Some of the top five holdings resemble the composition of WOOD, currently looking like the following: WY (5.67%), WFTBF (5.23%), RYN (5.10%), PCL (5.08%), and FBR (5.06%).


One can note that CUT has more of an “equal weighted” look to it among its top 10 companies, compared to WOOD.


Another significant difference here is in terms of expense ratios, as WOOD charges 48 basis points versus CUT coming in at 65 basis points. YTD, CUT has edged out WOOD in terms of performance, up 13.06% versus WOOD rallying 10.00%, but in the trailing one year period WOOD has outgained CUT (+9.52% versus 8.66%).



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Should You Buy Real Asset ETFs On The 'Real' Pullback?

Should You Buy Real Asset ETFs On The 'Real' Pullback? | Timberland Investment | Scoop.it

Timber has been weak since the Federal Reserve announced its enormous bond buying initiative. Agricultural grains have been even weaker since the peak of drought fears in mid-July. And crude oil? Instead of surging past $100 per barrel, it closed below $88 per barrel on 10/3/12.


The question is simple: If gurus from Jim Rogers to Bill Gross to Kyle Bass believe real assets belong in your portfolio, should you buy them now… when they are down below recent 52-week highs? By the same token, which Real Asset ETFs make the most sense for income generation, capital appreciation and/or inflation protection?

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I believe it is sensible to add Real Asset ETFs to a portfolio. I have been rather outspoken about a preference for natural gas producers via First Trust Revere Natural Gas (FCG). Others may see less political controversy with a position in Guggenheim Global Timber (CUT). Perhaps more importantly, these and other Real Asset ETFs have lower correlations with the broader stock market, making them desirable for genuine diversification and non-correlation.


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Hurricane Isaac moves the needle on oil and timber ETF's

Hurricane Isaac moves the needle on oil and timber ETF's | Timberland Investment | Scoop.it

Stocks had yet another low volume session and ended up going nowhere for the most part of the day.

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Hurricane Isaac remained the focus of much of the commodity world, as the storm made landfall on the Louisiana coast. Energy trading was mixed as WTI crude fell by about 1.3%, while natural gas added 2.1% on the day.

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One ETF that saw a great deal of volume in today's session was the PowerShares Dynamic Oil & Gas Services Fund ( PXJ ) . This product usually does about 30,000 shares in volume a day but saw a spike to just over 780,000 shares, a nearly 20x increase.

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Another ETF that saw an unusual amount of volume today was the Guggenheim Timber Fund ( CUT ) . This product usually does about 40,000 shares in a normal day but saw roughly 3x this level today.


A large reason for this outsized trading could also be the hurricane and its impact on timberlands in the path of the storm as well as housing demand after the damage is realized. Probably, the storm isn't as bad as everyone feared, at least from this angle, sending shares of CUT down about 0.8% on the day.


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Guggenheim Timber Poised for a Rebound

Guggenheim Timber Poised for a Rebound | Timberland Investment | Scoop.it

Guggenheim Timber has been soaring since hitting a record low last fall. Specifically, Guggenheim Timber slid last year to $15.41 per share on October 3 and again on November 25. The price of Guggenheim Timber has traded up more than 20% since hitting last year’s low.

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Performance Review For 4 Timber REITs And 1 Timber ETF

Performance Review For 4 Timber REITs And 1 Timber ETF | Timberland Investment | Scoop.it

So far in 2012, these five equities have appreciated by an average of 9.54%. Over the last six months, the group has appreciated by an average of 12.42%.

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Timber ETFs To Benefit From Housing Recovery

Timber ETFs To Benefit From Housing Recovery | Timberland Investment | Scoop.it
Timber ETFs To Benefit From Housing Recovery-Any pickup in the housing construction and remodeling activities will result in increased demand for wood.
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BlackRock acquires timber ETF provider

BlackRock acquires timber ETF provider | Timberland Investment | Scoop.it
Acquisition of Claymore Investments gives it 85 per cent of market, with $36-billion in assets...
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