F. David Segal is a tree hugger – so to speak. Specifically, he likes timber.
For one thing, he points out, the wood imported from British Columbia in Canada has been suffering from an infestation of pine beetles, which will severely curtail its output over the next three to fivc years. Besides which, wood is sorely needed by expanding countries—for construction, for boxes, for fiber. And there aren’t many hardwood trees in China . Meanwhile, Russia has pulled back its timber exports. As for the U.S. , we import approximately one-third of our own lumber needs.
Segal expects lumber prices to rise over the next two to five years.
Another thing in timber’s favor: It has a built-in inflation-hedge. As lumber gets older, it automatically becomes more valuable.
Segal is co-portfolio manager of the Mutual Series Fund, as well as an analyst specializing in autos and auto parts, paper and forest products industries, and special situations.
Among his favorite stocks, not surprisingly, is Weyerhauser, which is into forest products as well as home-building. The Mutual Series Funds people are activists – which means that the people working there don’t just sit around sleepily and let company managements do all sorts of dumb things. Mutual Series has been working with Weyerhauser to maximize shareholder value.
Another stock Segal likes: General Motors. (Did you faint?) “It’s a long-term play,” he said. “There’s a lot of long-term value there. Its efficiency and quality have gone up. Labor negotiations have been very positive. But there are legacy issues”—promises made to workers (which will be mitigated beginning in 2010), as well as macro-economic headwinds in the near term.
Auto parts suppliers are another possibility. “They’re good companies, and the slowdown is hurting them.”
Yes, he is finding “opportunities” in the current volatile market—good companies with a good cash flow, which might be under pressure because of debts.
As for financial stocks, “There’s light at the end of the tunnel, but I don’t know how far we are from the end of the tunnel. There are always unknown risks. You need a strong stomach. If the risks seem too large, you wait. In the investment business, you’re always going to screw up. What you must do is learn from your mistakes, and not replicate them.”
The superb Mutual Series funds are, of course, bottom fishers. The managers look for stocks selling at steep discounts to their intrinsic value, where something seems to be happening that may boost the stock price—like a change in management, or a repurchase of shares -- and they hold them for two or three or more years. The funds have wonderful records, which is perhaps why they have more than $75 billion in assets. (I own shares of a few of the funds.)
The 25 professionals who work at Mutual Series in Short Hills, N.J., sit in one big room. So, if something newsy and important happens, everyone can “get together in short order.” They are also encouraged never to go out to lunch—just in case something big occurs while they are dining far away. The funds make it easy to eat lunch in: Lunches are free. (I craftily arrange to schedule interviews with portfolio managers there at lunchtime.)
Segal said that he’s seeking for “absolute” returns. If the S&P 500 index is down 20%, his heart doesn’t leap up just because his fund is down only 15%. He wants positive returns. He’s a young man—38—and he has a lot of money in the Mutual Series Funds and in New Jersey ’s 529 College Savings Plan (which invests in the funds), so he suffers excruciatingly if the funds are down at all.
Segal spoke before a breakfast group the other day, and one question was: How does he calculate intrinsic value? His answer: What would the market pay for the company or one like it? Are there hidden values? Stocks can get mispriced, but “the noise dissipates over the long term.”
What about commodities? When the dollar strengthens, their prices will fall. “That will alleviate some pressure.”
Energy? “The horse has left the stable. There’s a permanent shift toward greater efficiency.”
Segal received his BA from the University of Michigan , Ann Arbor , and an MBA from New York University ’s Stern School of Business. He is a Chartered Financial Analyst.
From the Weyerhauser Website:
“We are inspired by trees. Their strength, vitality, and unlimited potential to be transformed into useful products have guided our approach to business for more than a century. Trees and human ingenuity are equally precious, sustainable resources, and we are committed to growing both.”
For one thing, he points out, the wood imported from British Columbia in Canada has been suffering from an infestation of pine beetles, which will severely curtail its output over the next three to fivc years. Besides which, wood is sorely needed by expanding countries—for construction, for boxes, for fiber. And there aren’t many hardwood trees in China . Meanwhile, Russia has pulled back its timber exports. As for the U.S. , we import approximately one-third of our own lumber needs.
Segal expects lumber prices to rise over the next two to five years.
Another thing in timber’s favor: It has a built-in inflation-hedge. As lumber gets older, it automatically becomes more valuable.
Segal is co-portfolio manager of the Mutual Series Fund, as well as an analyst specializing in autos and auto parts, paper and forest products industries, and special situations.
Among his favorite stocks, not surprisingly, is Weyerhauser, which is into forest products as well as home-building. The Mutual Series Funds people are activists – which means that the people working there don’t just sit around sleepily and let company managements do all sorts of dumb things. Mutual Series has been working with Weyerhauser to maximize shareholder value.
Another stock Segal likes: General Motors. (Did you faint?) “It’s a long-term play,” he said. “There’s a lot of long-term value there. Its efficiency and quality have gone up. Labor negotiations have been very positive. But there are legacy issues”—promises made to workers (which will be mitigated beginning in 2010), as well as macro-economic headwinds in the near term.
Auto parts suppliers are another possibility. “They’re good companies, and the slowdown is hurting them.”
Yes, he is finding “opportunities” in the current volatile market—good companies with a good cash flow, which might be under pressure because of debts.
As for financial stocks, “There’s light at the end of the tunnel, but I don’t know how far we are from the end of the tunnel. There are always unknown risks. You need a strong stomach. If the risks seem too large, you wait. In the investment business, you’re always going to screw up. What you must do is learn from your mistakes, and not replicate them.”
The superb Mutual Series funds are, of course, bottom fishers. The managers look for stocks selling at steep discounts to their intrinsic value, where something seems to be happening that may boost the stock price—like a change in management, or a repurchase of shares -- and they hold them for two or three or more years. The funds have wonderful records, which is perhaps why they have more than $75 billion in assets. (I own shares of a few of the funds.)
The 25 professionals who work at Mutual Series in Short Hills, N.J., sit in one big room. So, if something newsy and important happens, everyone can “get together in short order.” They are also encouraged never to go out to lunch—just in case something big occurs while they are dining far away. The funds make it easy to eat lunch in: Lunches are free. (I craftily arrange to schedule interviews with portfolio managers there at lunchtime.)
Segal said that he’s seeking for “absolute” returns. If the S&P 500 index is down 20%, his heart doesn’t leap up just because his fund is down only 15%. He wants positive returns. He’s a young man—38—and he has a lot of money in the Mutual Series Funds and in New Jersey ’s 529 College Savings Plan (which invests in the funds), so he suffers excruciatingly if the funds are down at all.
Segal spoke before a breakfast group the other day, and one question was: How does he calculate intrinsic value? His answer: What would the market pay for the company or one like it? Are there hidden values? Stocks can get mispriced, but “the noise dissipates over the long term.”
What about commodities? When the dollar strengthens, their prices will fall. “That will alleviate some pressure.”
Energy? “The horse has left the stable. There’s a permanent shift toward greater efficiency.”
Segal received his BA from the University of Michigan , Ann Arbor , and an MBA from New York University ’s Stern School of Business. He is a Chartered Financial Analyst.
From the Weyerhauser Website:
“We are inspired by trees. Their strength, vitality, and unlimited potential to be transformed into useful products have guided our approach to business for more than a century. Trees and human ingenuity are equally precious, sustainable resources, and we are committed to growing both.”
