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Timber! Watch out for falling stock prices

For the past 5 years, the forest-product sector "was one of the best places in the market to invest," says Tom O'Brien, financial analyst and editor of Market Insights. But O'Brien says the run of companies in the sector is near its end. These businesses are driven by real estate construction, and right now the housing sector is overbuilt. It will take a few years to recover. There also are problems from overextending credit. O'Brien gives two thumbs down to both Plum Creek (NYSE:PLC; Price: $40.91; PE: 27) and Weyerhaeuser (NYSE:WY; Price: $67.73; PE: 11) for those reasons.

Catherine Avery, president of Catherine Avery Investment Management; agrees but adds, "Plum Creek Timber and Weyerhaeuser are two companies I would consider for purchase after stabilization in the price of their stock." Avery says she's targeting stock prices of $40 to $42 per share for Plum Creek and $65 to $68 for Weyerhaeuser. She'll also key on future earning estimates heading upward.