Skip to Content
Stock Strategist

Switching Costs Keep Rayonier Compelling for the Long Term

Despite a difficult 2014, our long-term outlook for the narrow-moat firm is intact.


 Rayonier Advanced Materials (RYAM) manufactures cellulose specialties, or CS, for a variety of applications. It is the industry's biggest player, with about 30% of the 1.6 million-ton market. Acetate tow, used mainly in cigarette filters, is the company's top product, accounting for about 80% of the 479,000 tons of CS that Rayonier sold in 2014. Rayonier is the world's top acetate producer, supplying a little more than half of the market.

Acetate tow is a very profitable business for Rayonier. Demand is recession-resistant, and high switching costs based on taste make for sticky customer relationships. However, long-term growth prospects for the business are limited. Global cigarette demand growth is likely to be less than 1% annually. Other CS applications are enjoying stronger growth, but the market as a whole is growing a modest 2%-3%.

Daniel Rohr does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.