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In the beautiful Pacific Northwest, on the long drive from Portland to the coast, trees stretch in every direction.
I made a stop and struck up a conversation with a friendly stranger and made a comment about how beautiful the land was. I asked if this was a state park.
“No”, he responded. “This is an owned forest. This is a Weyerhaeuser forest.”
Weyerhaeuser is the largest owner of timberland in the United States. If we value its timberland in the northwest, northeast, and southern US at market prices for such land, the total would come to $31-41 billion. The current market cap is $17.7 billion.
Assumptions:
Pacific Northwest: 2.5 million acres at an estimate $4000-9500 per acre \~ $18-21 billion
US South: 6.9 million acres at $2000-3500 per acre \~ $12-18 billion
Northeast: 1.0 million acres at $1500-2500 per acre \~ $1.5-2.5 billion
You can play around with your favorite LLM on these assumptions, but any way you cut it, the value of the timberland is higher than the current market cap.
It has about $5 billion in net debt, so the enterprise value is about $23 billion, or about 25% below the bottom end of the range.
Weyerhaeuser holds its timber land as a real estate investment trust (REIT). It doesn’t pay corporate tax on timberland profits (timber sales and land sales) and it has to pay out 90% of its taxable income as a dividend. The current yield is 3.4%.
But that’s not all!
It also holds a Taxable REIT Subsidiary, which is its wood products business. This business generates the vast majority of revenue, but almost no income, because we are in a trough of the cycle for lumber prices. There are 19 sawmills, 6 oriented strand board plants, and 6 engineered wood products facilities, and in 2025, they barely broke even with $55 million of operating profit on $4.9 billion in revenue, a 1.1% operating margin.
I mentioned are in a trough for lumber prices. I’ll explain.
Lumber prices were mostly in the range of $200-400 per thousand board feet before COVID. Then things went insane and they went to $1800 per thousand board feet.
What changed? Mortgage rates dropped to very low levels and stimulated a bunch of housing demand.
Saw mills built excess capacity from 2000-2008, then spent 2008-2020 cutting capacity in a weak pricing environment, and were caught flat footed when demand for lumber soared.
Capacity ramped up again after the price spike of 2021-2022. But now capacity is starting to go down. And lumber prices bottomed in late 2025 right when capacity was at peak, and now lumber prices look to be turning higher…
The lumber business doesn’t have to make any money for this stock to be undervalued. You are getting a bunch of US timberland for a 25% discount to fair price, with a 3.4% dividend yield. You get all the lumber facilities for free. And in a good year for lumber prices, like 2021 or 2022, that business can produce something like $1.5-2 billion of after tax profits.
The downside is protected by the timber land values and the upside is somewhere down the road, if this country ever starts actually BUILDING MORE HOUSING, there will be a big bull market in lumber and the sawmill/wood products business will do really well.
I think the bear case is basically that it is a value trap, so the stock stays flat while you collect a 3% dividend. In the bull case, we go into a bullish cycle for lumber, and if we put an 8-10x multiple on the wood products business, it isn’t hard to envision a double in the stock.
Tl;DR:
I like trees. 🌲