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As part of David Merkel’s rules on industry selection, he lists the following:

• Buy strong companies in weak industries when the industry pricing outlook seems hopeless.
• Buy moderate to strong companies in strong industries where the earnings power and duration are underestimated.
• Underweight/ Ignore/ Short industries where pricing power is likely to be negative for several more years, and especially industries that are in terminal decline.
• Avoid fad industries. There are P/E levels that no industry can grow into.

My best example of #1 is the P&C insurance industry in early 2000. Total gloom. I

By: Don Miller

There’s a classic squeeze going on in the timber markets right now.