Mason Hawkins (Trades, Portfolio)’ Southeastern Asset Management sold out of Rayonier Inc. (RYN, Financial) on March 31.
Hawkins has served as Southeastern’s chairman and CEO since its inception in 1975. His firm also manages the Longleaf Partners fund. The investment team uses an in-depth, fundamental approach to find strong companies with good management that are trading at a discount.
According to GuruFocus Real-Time Picks, the firm sold more than 6.7 million shares of Rayonier for around $28.34 per share, impacting the portfolio by -1.7%.
Structured as a real estate investment trust, Rayonier owns and operates forest resources, timberlands and real estate in nine U.S. states and New Zealand. Headquartered in Jacksonville, Florida, the company has a market cap of $3.7 billion; its shares were trading around $28.74 on Tuesday with a price-earnings (P/E) ratio of 16.7, a price-book (P/B) ratio of 2.5 and a price-sales (P/S) ratio of 4.5.
The Peter Lynch chart below shows the stock is trading slightly above its fair value.
GuruFocus ranked Rayonier’s financial strength 6 of 10. The high Piotroski F-Score of 7 and moderate Altman Z-Score of 2.7 suggest the business is stable but is experiencing some minor financial stress. The company’s return on invested capital (ROIC) outperforms its weighted average cost of capital (WACC), indicating the company is creating value as it grows. The cash-debt ratio of 0.08 and interest coverage ratio of 7.8 indicate the company is not in the best position to pay outstanding debt.
The company’s profitability and growth was ranked 6 of 10 by GuruFocus. It has an operating margin of 32.5% and a net margin of 26.9%. The company’s return on equity (ROE) and return on assets (ROA) outperform 81% and 83% of other companies in the global wood and lumber production industry. Similarly, its return on capital (ROC) outperforms 99% of competitors. It has a three-year revenue growth rate of 8.2%, a three-year EBITDA growth rate of 9% and a three-year EPS growth rate of 29.3%.
Rayonier’s trailing dividend yield and forward dividend yield are both 3.5%. It pays a quarterly dividend of 25 cents per share.
Before exiting its position, Hawkins’ firm was Rayonier’s largest guru shareholder with 5.3% of outstanding shares. Other gurus holding the stock include T Rowe Price Equity Income Fund (Trades, Portfolio), Third Avenue Management (Trades, Portfolio), Jim Simons (Trades, Portfolio), John Buckingham (Trades, Portfolio) and George Soros (Trades, Portfolio).
Southeastern also holds shares of Deltic Timber Corp. (DEL, Financial), another forest products company. As of fourth-quarter 2016, basic materials stocks had a weight of 5.7% in the firm’s portfolio.
Disclosure: I do not own any stocks mentioned in the article.
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