Morningstar.com Measuring the Market's Value Monday July 16, 7:00 am ET By Sonya Morris, CPA REIT stocks have stumbled recently. In fact, iShares Cohen & Steels Realty Majors ETF (AMEX:ICF - News) lost almost 12% during the second quarter. Nevertheless, REITs ran so strong for so long that they remain squarely in overvalued range, which suggests that there could be more downside to come. Finally, here's a table of price/fair value ratios for selected ETFs. A price/fair value ratio is simply the ETF's price divided by its collective fair value. A price/fair value ratio below 1.0 indicates that the ETF is undervalued, while a price/fair value ratio above 1.0 indicates that the ETF is overpriced. http://biz.yahoo.com/ms/070716/198570.html?.v=1
Bear_market, thank you for the link to an interesting article. I�d upgrade this comment to thank you for the excellent article if it anywhere defined �fair value.� �17% over fair value� loses a lot of its punch without such an explanation. Greenstreet advisors sees it about as far in the other direction � REITs at about a 20% discount to NAV as of July. http://www.greenstreetadvisors.com/about/page/research_nav/ While net asset value has its own sort of vulnerabilities as a standard, at least the definition is plain.
I guess what impresses me most is the uncertainty implicit in this extreme variance in perceived fundamental value. +17 vs -20 is a whole lot of percentage points. In the face of such uncertainty, maybe potential REIT investors (read me) should wait and see a while longer. Any reason why we/I shouldn't?