Sarge, make sure you distinguish between REITS and mREITs. Rising rates historically have been good for property REITs and can even be good for nonagency and commercial mortgage REITs. The other side of the argument is what Bud says -- rates may rise but top out because of the structural problems in the economy, although I don't see that happening until the 10 yr gets to 3%.
Up near 2.77% after the Fed meeting. Keep an eye on it. It has challenged this area 4 times since late January with a false break out recently. Most mREITs sold off after reaching recent highs, probably more due to the threat of spo's rather than the rate rise.
Gambler, Jeremy Grantham was interviewed in Barrons this week and said small caps were overvalued. But looking at the chart of the Russell 2000, they are not going parabolic and appear to have one of those nice 45 degree up charts. If you think that small caps are overvalued, then for certain small biotechs are overvalued. Playing the TZA can certainly pay off if you time it correctly, but if one wanted to just be short small caps, it's probably better just to short or buy puts on the IWM.
Bayman, someone on another board mentioned that NYMT did a spo 13 days after their last ex-date. The stock price is 1.20% of the book value, which is in the spo range.
It's not so much of what he likes (although he mentioned DOC OHI and VTR), but how one should try to analyze this sector to decide what represents the best risk/reward, using cagr, growth in FFO and the required rate of return.
Factoids is a poster on the investor village board who has authored some articles on investing in MLPs. He has a new article on medical REITs and explores the concept of required rates of return for the different property types in this sector. Good reading.
Sarge, on Apple, I think they are in a show-me state. Any of these could turn out to be blockbusters or they could turn out to be also-rans. The market is no longer just assuming that the next Apple product will automatically be a blockbuster. There are already ewallets, watch phones, TV apps and larger screen phones, so anything they do in these areas will really have to blow the doors off of the competition and create a product that creates a new demand. In essence they are a victim of their own past success and the bar is high. On the TV side, the content providers aren't like the record companies and there are many options with Netflix, Amazon, and Google all eyeing this market.
On the drillers, there was yet another negative article in yesterday's WSJ. Maybe that's a sign that all of the bad news is out, but maybe the sector doesn't bottom until people stop talking about it. The charts will tell when the selling is done.
I disagree. I think SFL was overbought a few weeks ago when it went over RSI 70. It retraced that move up and seemed to touch the bottom of its upward channel. I think it goes higher and takes out the previous high. SDRL on the otherhand is drifting downward and probably bottoms under $30. Previous support on SDRL was around $28 a few years back.
Bayman, if the mREITs have opportunities to buy product they will do an offering if their share price is over book value and the offering will be accretive. You might be able to look back through the SEC filings to see the past offerings and try to match the dates with the chart to see when the RSI level gets overbought to see if there is a pattern. Call me a conspiracy theorist, but the dealers on Wall Street know when someone is buying a deal. The underwriters like to get their hedge fund clients to bid up the price of a stock of a company planning an offering, and then the hedgies short the stock at the top and cover with the shares of the offering some 4% lower. That's how the sausage is made. So any time you see a spike in the price of an mREIT, especially one that goes over RSI 70, the risk of an spo is increased.
Well its held up well despite the 10k being out with the $6 PV-10 value. Although all it takes is one negative s.a. article to get the algo traders to start selling. We are now less than 6 weeks from the next distribution announcement when we typically get a run-up in price. By that time, we should know how nat gas prices are holding up and how they did during the winter when higher nat gas prices SHOULD have helped their revenues.
I still own some PER but would not recommend it. All of these recent royalty trusts have disappointed. Even though PER is mostly oil, its share price keeps dropping and its PV-10 report on its reserves is now below the current share price. Eventually its payout will decline. Meanwhile, they report a good percentage of the payout as interest income taxed at ordinary rates (the depletion is subtracted against the royalty amount, but there is substantial interest income because of the way the well payments are characterized for tax purposes). These royalty trusts tend to run up into their distribution announcements and then decline after the ex-date. Occasionally they get oversold and bounce, but their long term pattern is down.
I have been disappointed in the market reaction to the dividend announcement, but perhaps either there was some disappointment in the amount, or that now that it is declared, some institutional buying may now come in. They exercised the accordian feature on the credit line so they must have some acquisitions ready to close, and Dugan mentioned on the cc how the first quarter can be slow for deals to close. I too, thought about selling some but didn't want to sell on a down note. Technically the 50 dma level could be resistance so we'll have to see how the stock reacts as it approaches that level. I'm willing to give it some more time for more acquisitions. They have to get the stock to the mid $9's for the executives to get fully paid out.
Spent some time checking out brokerage reports from Wells Fargo on the REIT sector. If I remember correctly, this sector can be valued at 16-18 times FFO, but those metrics are mostly for well established REITs (I didn't see a report from Wells on GPT).
Sarge, stocks can always get more oversold and we have seen RSI levels get into the teens before a stock can bounce. SDRL previously reached RSI levels below 30, bounced and then continued down. That's why you have to look back into history to try to find a support level that may hold. Unfortunately, you don't know a stock has stopped going down until it stops going down.
Check out the charts. DBA has spiked vertical, and is overbought, but CORN and GRU seem to be breaking out of long downtrend channels. GRU just broke through the 200 dma and CORN is bumping up against it. Remember all of those broken support levels on the way down (and there are many of them) are resistance on the way up. Agriculture has been somewhat quiet. Was it 2 summers ago when prices were spiking?
Gambler, if you are interested in E&P MLPs that pay monthly, ARP and BBEP both do. ARP is part of the Atlas family and they are mainly in nat gas. Their yield is over 10% and they just went to monthly distributions. They are growing so expect to see many acquisitions and spo's. BBEP is mostly oil and is pretty steady, ranging between 18 and 20. Switching gears, depending on your tax status, you may want to consider national muni bond closed end funds. Many are yielding in the high 6% range and are selling at 10% discounts to NAV. Their dividends don't count toward the 3.8% additional tax if that is a concern. They got whacked last spring on the taper news, Detroit and Puerto Rico. Nuveen has a website where you can screen by yield and discount to NAV and other metrics. There are leverage and nonleveraged varieties. There are also a few closed end funds for Build America Bonds yielding 8% (taxable), but selling at a discount. They too got hit last spring. The BAB program ended so you don't have to worry about more supply of BAB bonds which means there should be a scarcity factor leading them not to trade at discounts. Like all fixed income products, the perception of rising rates will hurt, but as I have said, rates may be in a range and if they rise toward 3.25% that could cool the economy and lead rates to decline again.