market folly

Market strategist Jeff Saut is out with his weekly investment strategy commentary.  In it, he highlights various positive economic datapoints and he thinks GDP growth will accelerate in 2014 to 3%.

Saut also points out that the Fed is on the market's side with Janet Yellen set to takeover and "that implies no tapering and plenty of liquidity."

He also touches on how housing market bulls have cooled a bit due to rising interest rates.  He notes that over the past few weeks, rates have retraced a bit.


Weyerhaeuser (WY) as a Play on Housing

Saut highlights a "second derivative way" to get access to the housing theme via Weyerhaeuser (WY).  This is one of their analysts' current favorites and here's their take:

"We believe: 1) the embedded value of Weyerhaeuser’s homebuilding platform is underappreciated relative to other  public builder valuations (most notably, the 17,700 lots it controls in California); 2) the recent underperformance of  WY shares has created a buying opportunity; and 3) in the context of our REIT coverage, there are relatively few  opportunities to find similar long-term earnings/cash flow growth stories. In our view, Weyerhaeuser’s  homebuilding platform (one of the 20 largest in the country), significant wood products business, and immense  timberland portfolio position it as a compelling alternative to pure-play homebuilders in this housing recovery.  Weyerhaeuser is targeting a payout of 75% of FAD over the cycle and is well positioned to raise its dividend as the  housing recovery gains momentum. The company has already boosted its dividend by 33% since October (WY  shares currently yield ~3%)."


Embedded below is Jeff Saut's latest market commentary:




You can download a .pdf here.

And you can catch up on some of Saut's previous commentary here.