Real estate bust of 2007-2008 dropped by 80%. Off it's bottom by 20%, steady climb now for a while but still low volume. Eventually will get more attention then expect it to really take off!
You bought at 2.30 Winford? Well, If you bought 100,000 dollar at 2.30 or 0.30 it looks like your investment will yeild zip either way. The only difference is the time and years you lost not paying attention to the rest of your life.
Research on an ETF's holdings is important because an ETF's performance is only as good as its holdings. Therefore, if you care about performance, you care about the ETF's holdings. No matter how cheap an ETF is, if it holds bad stocks, performance will be bad. Low expenses on bad performance still results in bad performance.
PERFORMANCE OF ETF's HOLDINGS = PERFORMANCE OF ETF
The only problem with analyzing an ETF's holdings is that it is can be difficult and time consuming. Unfortunately for me but fortunately for you, I like difficult and time-consuming work as long as it gives me a competitive edge, of course.
In going through the 400+ US equity ETFs I cover (based on the 3000+ stocks I cover), I found one of the worst ETFs in the market: Pro Shares Ultra Real Estate (URE).
URE gets my worst rating, Very Dangerous. 88% of its portfolio (i.e. its guts) is in stocks that get my Dangerous or worse rating. Only 2% of its portfolio gets an Attractive or better rating.
Making matters worse: it is a double-long ETF so the leverage will amplify its performance 2x. That is good, of course, if the stocks in the ETF rise. It is really bad if they fall. According to my analysis of the fund's holdings, they are much more likely to fall than rise.
Also making matters worse, only two ETFs out of the 400+ I cover have a higher cost than URE. We measure the annualized cost of URE at 1.06%. That is higher than a lot of mutual funds. As a side note, we cover well over 7000 mutual funds. And I found ten that have annualized costs higher than 7%.
This ETF is expensive and has bad holdings. Double whammy.
Details on URE's Guts
Below I briefly cover URE's top five holdings and highlight why they are bad stocks. In summary, all of the stocks below have very expensive valuations and offer investors little to no upside while presenting significant downside risk. These five holdings are representative of most of URE's portfolio. As mentioned above, I rate 88% of URE's portfolio as Dangerous or worse. And only 2% of its holdings get my Attractive rating. More details are in a report on URE.
Simon Property Group (SPG) - Very Dangerous Rating: misleading earnings, and very expensive valuation. Current valuation implies the company will grow its cash flows (NOPAT) at 20% compounded annually for nearly 9 years. Historically, NOPAT growth is 9% since 1998.
American Tower (AMT) - Dangerous Rating: decent economics, very expensive valuation. Current valuation implies the company will grow its cash flows (NOPAT) at 20% compounded annually for 10 years. Historically, NOPAT growth is 20% over the last five years.
Public Storage (PSA) - Dangerous Rating: decent economics, very expensive valuation. Current valuation of the stock implies the company will grow its cash flows (NOPAT) at 17% compounded annually for nearly 15 years. Historically, NOPAT growth is 10% since 1998.
HCP Inc (HCP) - Dangerous Rating: mediocre economics, very expensive valuation. Current valuation of the stock implies the company will grow its cash flows (NOPAT) at 18% compounded annually for 15 years. Historically, NOPAT growth is 10% since 1998.
Ventas (VTR) - Very dangerous rating, misleading earnings and very expensive valuation. Current valuation of the stock implies the company will grow its cash flows (NOPAT) at 23% compounded annually for nearly 15 years. Historically, NOPAT growth is 17% since 1999.
In summary, I hate the guts of this ETF because it holds bad stocks, has among the highest costs in the US equity ETF world and it is leveraged 2x.
Disclosure: I receive no compensation to write about any specific stock or theme.
Sentiment: Strong Sell
Top rated analyst says real estate recovery to be stymied by recession. http://us.rd.yahoo.com/finance/external/pssa/SIG=12f3jtgqd/*http://seekingalpha.com/article/735701-builder-confidence-will-prove-fleeting?source=yahoo
Bought this in early '09 and keep adding to position in '09. Result: sold half position this afternoon and still have 1 1/2 times my original investment in the stock. Will hold these shares for more appreciation and take my huge winnings and went into LM, GNW, BIDU, HIG, and PETS. Thanks, URE. This was just a GREAT investment! And still have a position in it with all profit as my exposure now.
Commercial R.E. trades off of FFO therefore if that starts to go down it would most likely put pressure on the stocks. I am a believer that once you strip away all of the financial engineering that goes into FFO and all of the other metrics you are told to look at and get down to basics I don't see how rents don't come under pressure as a result of the internet, and the stagflation we are experincing. Customers have no job or no wage growth but gasoline, groceries, property tax, sales tax etc. have gone up. Something has got to give? Anyway I'm not a buyer of REITS with a 1 or 2% yield the risk reward is f--d up.
I have used my advanced charting software and economics/ math education with my advanced charting software. Pattern dow -66 s&p -6 keeps occuring on 2 hour charts. I calculated the dow will break 10,000 in less than a month.