despite this week that DOW dropped about 2.06%, S&P dropped 2.58% and NASDAQ dropped 3.01% since the opening on this Monday. It almost seems the market had dropped much worse than this, but I just calculated these figures using Monday's opening for all three indexes and their current indexes a few minutes ago. Indeed, the market can continue to tank. However, we have been waiting for this dip for a while now, therefore IMHO, if you believe any of the targeted stocks have reached your target prices, you may want to consider buying them, because nobody can time the bottom. In the short term, the market can and will continue to tank, but in the long term the rally can indeed resume. I am not saying this would not be a bumpy road but judging by some of these massive blanket selling, especially in the REIT (mREITs) sector, it has almost come to a point that for some good mREITs or hybrid REITs it was totally ridiculous. My friend called me last night and told me he now had almost 10000 shares of PMT because he strongly believes this one is very undervalued and has a lot of future potential because the company paid about only 50 cents on the dollars on those mortgages they purchased a few years ago and he said their CEO just bought about a million dollars worth of the stock:
5/23/13 Kurland Stanford Le...
Chief Executive Officer Purchase 39,600 22.44 – 22.78 586,890 $895.0 K
Kurland Stanford Le...
Chief Executive Officer Purchase 4,400 22.78 – 22.81 588,990 $100.3 K
At the current price of 20.25, it is traded at 0.97x of its NAV, with a 11.26% yield. Do not misunderstand me I am not trying to pump this one because I have not done enough researches to verify what he said. May be Wayne can interject some of his thoughts. From my past experience, this one could indeed sink abruptly all of a sudden, one time all the way to around 17.50. Its previous 12-mo low was 19.26 on1/16/12 and it can indeed continue to sink. However, it is worth to watch.
If you listen to the Canslim traders/followers, they tend to expect something like a 10% + correction in the S&P every cycle or so, and usually at least once every 3 - 4 years. They are saying that a correction has been overdue for some time. The S&P has slipped at least 6 - 7% on a 'gradual' basis within the past 2 months. I suspect we may actually have the full 10% or more soon. So .. what does that mean? expect price erosion for some period of time and yield appreciation. This has already started to happen in the rate-sensitive sectors such as REITs and BDCs. I look at this as great buying opportunities both for preferred and other debt as well as some capital-appreciation on selective common buys.
increasing rates is not such a bad thing, and will offer opportunities to simply average up on portfolio yield holdings...
If you take a look of some of the dividend stocks, whether they are pref. stock ETFs, REITs or BDCs, some of them had either reached their 12-mo lows about a week ago and continued to make new 12-mo lows. Many of them, IMHO, may have very close in bottoming out. Therefore, you must reed the bad from the goods and start buying the good ones you believe are really underpriced and should not wait too long. I had bought some PMT today at 19.98 so I may have a position. I bought some FSC yesterday at 9.92 because I believe that may be a good entry price for me. I bought some PPR at 6.09 yesterday because I believe if interest rate starts rising, floaters should rise also. I also bought some PHDat 12.79 because of the same reason. I am now watching PFLT closely and will start buying it if it happens to drop below $14. I believe its recent NAV is around 13.99 (hard to find its NAV). I am holding my PSEC and AINV plus I bought some BKCC, TICC yesterday because I believe in an environment of rising interest rate, many BDCs will outperform other sectors because basically they are floating rate junk bonds (almost). I let go, though reluctantly of some of my pref. stock CEFs because if interest rate starts rising, they are basically BONDs no matter how good they are. Their abrupt drop lately confirmed this. I also bought some VGR, a tobacco company that pays a 10.16% dividend at today's price of around 15.75. Of course, for a tobacco company who pays a dividend so much higher than its peers, there is a fear that it may reduce its dividend, however, it has been paying its quarterly dividend of 40 cents since 12/2000. If its price drops, I will add more. I am holding on to my COP and OXY though they dropped. One needs some OIL stocks. I also still have my GGN.
I agree with Wayne in that NCT and NRF may be good REITs (non-mREITs) to hold for long term, but I am not convinced either one has finished bottoming out yet and I am unwilling to hold them at their current prices with their current yields. Now I do still have the RSO I bought yesterday at 6.13, its recent NAV is about 6.12. I had bought more IVR today at 17.33 today, considering its next ex-div date is on 6/25 with a 0.65 dividend, therefore, it may rise or fall, on or before its ex-div date, nobody knows. But it had reached its 12-mo low of 17.28 yesterday, with the 61 cents dividend, if you bought it at 17.28, then means your actual cost will be 16.67. It is currently traded at 17.67, only 0.85x of its BV. (NAV is about 20.78) On their inside trades, since 8/12, all are purchases (at much higher prices) and I do not see a single sales. To me that is quite impressed. Again, do not get me wrong, you better do your own DD before you buy it because this is indeed a very risky time to buy and hold anything. By the way, its yield is 14.72% at its current price. I am long on this one.