REITs and NAV
- Thread starter xicaju
- Start date
Good luck if you think you can pick the pockets of these Amex guys thru REIT's.
Why don't you just give it a try?
It won't cost you too much.
maglia rosa
Guest
How would you ever know what a REIT's NAV is?
You would have to be able value the company's assets and liabilities. That might pose a challenge. You'd need a handful of fairly competent analysts with good spreadsheets.
You would have to be able value the company's assets and liabilities. That might pose a challenge. You'd need a handful of fairly competent analysts with good spreadsheets.
See Chapter 12:"Boom or Bust" of the recently published "Practical Speculation" by Victor Niederhoffer and Laurel Kenner.
Lots of good sources, even if you disagree with the authors negative views on REITS as an effective portfolio diversifier. The authors comments are addressed to investors rather than traders but they do highlight some good stuff regarding NAVs. It is commonly understood that Net Asset Values are based on appraisals and not market transactions (this by necessity of course) and so the resulting values are not only smoothed by highly serially correlated and out of step with real market prices. During most periods, the stock price of REITS is lower than their NAV, this tells you what the market thinks of NAV!
Lots of good sources, even if you disagree with the authors negative views on REITS as an effective portfolio diversifier. The authors comments are addressed to investors rather than traders but they do highlight some good stuff regarding NAVs. It is commonly understood that Net Asset Values are based on appraisals and not market transactions (this by necessity of course) and so the resulting values are not only smoothed by highly serially correlated and out of step with real market prices. During most periods, the stock price of REITS is lower than their NAV, this tells you what the market thinks of NAV!
I have been trading REITs in a swing trade mode for the last three years. I use AMIbroker to alert for weakness below the NAV line I draw on the chart. It doesn't take much daily time (after getting setup) and the return has been good.
I use NAVs from Barry Vinocur's Realty Stock Review (.com). The sub is about $350/year and I have paid it back each year easily. Basically though that's all I buy it for since I am really not interested in a lot of the nitty gritty coverage of reit properties. His "Side by Side" 6 page spreadsheet has most of the large/mid cap Reits covered...along with div coverage percentages (and tons of other fin data) which is good to judge the 'nervousness' level of the buy-and-hold yieldies.
My approach in this down mkt is simply buying undervalued -20% to -30%NAVs and sell at NAV+5%. Swings usually take 1-10 months and catching the 6-9% (annualized) divs every 90 days is a clear perk.
Another good play for me has been to watch the REIT preferreds of companies whose qtrly earnings drop and raise the common div payout over 100% (short term). The pref holders dump their shares into a thin market causing some interesting short term price distortions. I've picked up a fair amount of good trades at virtually no risk.
Prefs are generally non-convertible, cumulative with a $25 redemption preference if mgmt finds cheaper financing. I love buying these at $20.
If you want to see a sample of this go to:
www.quantumonline.com and under search type in ENN-A...check the chart at www.bigcharts.com with symbol ENNPRA. The prefA recently sold down to $21 and is now back up to $24...but still yields 9.9% even at this recovered level. (BTW...be real picky....watch the bid-ask spreads before you buy ....some are outrageous due to the low volume. Do you own due diligence...
Good luck to you!
Bruce
I use NAVs from Barry Vinocur's Realty Stock Review (.com). The sub is about $350/year and I have paid it back each year easily. Basically though that's all I buy it for since I am really not interested in a lot of the nitty gritty coverage of reit properties. His "Side by Side" 6 page spreadsheet has most of the large/mid cap Reits covered...along with div coverage percentages (and tons of other fin data) which is good to judge the 'nervousness' level of the buy-and-hold yieldies.
My approach in this down mkt is simply buying undervalued -20% to -30%NAVs and sell at NAV+5%. Swings usually take 1-10 months and catching the 6-9% (annualized) divs every 90 days is a clear perk.
Another good play for me has been to watch the REIT preferreds of companies whose qtrly earnings drop and raise the common div payout over 100% (short term). The pref holders dump their shares into a thin market causing some interesting short term price distortions. I've picked up a fair amount of good trades at virtually no risk.
Prefs are generally non-convertible, cumulative with a $25 redemption preference if mgmt finds cheaper financing. I love buying these at $20.
If you want to see a sample of this go to:
www.quantumonline.com and under search type in ENN-A...check the chart at www.bigcharts.com with symbol ENNPRA. The prefA recently sold down to $21 and is now back up to $24...but still yields 9.9% even at this recovered level. (BTW...be real picky....watch the bid-ask spreads before you buy ....some are outrageous due to the low volume. Do you own due diligence...
Good luck to you!
Bruce
I am probably stretching the limits of the term when I say "trading" with REITs. It is definitely on the slower end of the spectrum. At 50, I need a lot less portfolio heat for two reasons...the college money will need to be paid over the next 7 years and retirement cash is to follow that ... thus my concetration on less risky assets in publicly traded real estate. I can not imagine widely diversifying and shooting for market returns...ever...let alone now. A small investor/trader doesn't have all the investment negatives of someone running a really large amount of money....why not take advantage of every angle you can work? (particularly by getting the return you need while not exposing your assets more than necessary.)
I like Charlie Munger's philosophy of putting all your eggs into a basket you understand....and watch the basket closely...and keep getting better at that. My direct philosophy is to Engineer the return I need.
The 6 month time frame in real-estate-think would be "recent" where with QQQs its "Jurassic"...LOL... all depends on where you are on your life trip....unfortunately I'm closer to the fossil end. The positive is that for the last two years I have made more in cap gains/divs than I did in the past five. So I thank my lucky stars for that. I still trade a few favorite gold stocks and rboc telecoms when they get especially ripe...but it is strictly cake icing.
Risk tolerance....I strictly limit losses...money mgmt changes I have made in my trading have doubled my net. A couple of years ago I threw all my trades into a spreadsheet and plotted the winners and loses around the x-axis. I was skewed to the positive, but it dawned on me that if I would truncate every trade going south tightly by absolute, no-exceptions rule...I would do a lot better. Sure....I missed a number of trades that turn right around and were winners....but you can't tell which ones they are. So the only statistically effective method is to kill them all. I did this all of 2002 and I did miss a bunch....but the new spreadsheet AND the bottom line made this something I will never change....it really shocked me. (I did have to surf for more trades ....which was another downside...but again...ultimately worth it. Only 65% of my trades were positive...but I let them run to swamp out the 35% that I chop off.
I target large and mid cap REITS on the NYSE....I take an occasional small cap if the div is good. I've done some research on the complete unknowns out there and have found some really excellent mgmt teams doing the right thing for the stockholders...so I have little to fear about the next Enron showing up in REITs. I have only found two or three that are really ugly (mgmt salaries way to high comparatively, wife on the payroll doing all the interior decorating)...and by Enron standards the worst REIT games I've seen are still really nothing.
I target $20-30k per position and total 'serial' buys and sells for the year totaled about 4.5 times my total capital and I never put more than 5% of my total capital in any one position. I only came within about 50% of being fully invested one time in 2002. I made about 430 trades last year...largely putting in low ball long or high ball short limit orders the night before.
The oddest REIT situation I ran into was Host Marriott after Sept11th. I had been looking at it for a while but it was running about 95% of NAV and I was hoping to buy in at 80-85%. When that awful time was over and the market reopened, HMT was sold mercilessly because one of its 158 hotel structures was destroyed. I had heard that the hotel was evacuated and no one was inside when the building was crushed. The stock was selling at 50% of NAV. I looked up the website and mgmt had noted there that they had full replacement value insurance...AND even business continutation insurance to cover the profit lost in a calamity. Obviously...the situation amounted to pure emotional panic selling...I took a position in Oct and held until it came back close to NAV. I felt so sorry for all those people, but the only thing I could really do to help the country was to send my kids to college and pay my taxes so the Govt could buy some Daisy Cutters for 1st Class delivery to Usama. Somebody's gonna take me to task for that one, but ultimately if you don't do what you can...you are not moving the country ahead.
Here is something I have found VERY valuable. There is the greatest bunch of helpful folks on the Yahoo REIT boards. I mean these guys are securities lawyers, general managers, CFOs and CEOs helping out the small guy...while making their securities more attractive. The CEOs of MAA and MNRTA regularly drop by and take questions...I have learned so much there....I really recommend it. It's not as clean as here...but how each person uses their words tells you whether the person is profane/ignorant or good hearted/intelligent.
What REITs are you guys looking at?
Tnx!
Bruce
I like Charlie Munger's philosophy of putting all your eggs into a basket you understand....and watch the basket closely...and keep getting better at that. My direct philosophy is to Engineer the return I need.
The 6 month time frame in real-estate-think would be "recent" where with QQQs its "Jurassic"...LOL... all depends on where you are on your life trip....unfortunately I'm closer to the fossil end. The positive is that for the last two years I have made more in cap gains/divs than I did in the past five. So I thank my lucky stars for that. I still trade a few favorite gold stocks and rboc telecoms when they get especially ripe...but it is strictly cake icing.
Risk tolerance....I strictly limit losses...money mgmt changes I have made in my trading have doubled my net. A couple of years ago I threw all my trades into a spreadsheet and plotted the winners and loses around the x-axis. I was skewed to the positive, but it dawned on me that if I would truncate every trade going south tightly by absolute, no-exceptions rule...I would do a lot better. Sure....I missed a number of trades that turn right around and were winners....but you can't tell which ones they are. So the only statistically effective method is to kill them all. I did this all of 2002 and I did miss a bunch....but the new spreadsheet AND the bottom line made this something I will never change....it really shocked me. (I did have to surf for more trades ....which was another downside...but again...ultimately worth it. Only 65% of my trades were positive...but I let them run to swamp out the 35% that I chop off.
I target large and mid cap REITS on the NYSE....I take an occasional small cap if the div is good. I've done some research on the complete unknowns out there and have found some really excellent mgmt teams doing the right thing for the stockholders...so I have little to fear about the next Enron showing up in REITs. I have only found two or three that are really ugly (mgmt salaries way to high comparatively, wife on the payroll doing all the interior decorating)...and by Enron standards the worst REIT games I've seen are still really nothing.
I target $20-30k per position and total 'serial' buys and sells for the year totaled about 4.5 times my total capital and I never put more than 5% of my total capital in any one position. I only came within about 50% of being fully invested one time in 2002. I made about 430 trades last year...largely putting in low ball long or high ball short limit orders the night before.
The oddest REIT situation I ran into was Host Marriott after Sept11th. I had been looking at it for a while but it was running about 95% of NAV and I was hoping to buy in at 80-85%. When that awful time was over and the market reopened, HMT was sold mercilessly because one of its 158 hotel structures was destroyed. I had heard that the hotel was evacuated and no one was inside when the building was crushed. The stock was selling at 50% of NAV. I looked up the website and mgmt had noted there that they had full replacement value insurance...AND even business continutation insurance to cover the profit lost in a calamity. Obviously...the situation amounted to pure emotional panic selling...I took a position in Oct and held until it came back close to NAV. I felt so sorry for all those people, but the only thing I could really do to help the country was to send my kids to college and pay my taxes so the Govt could buy some Daisy Cutters for 1st Class delivery to Usama. Somebody's gonna take me to task for that one, but ultimately if you don't do what you can...you are not moving the country ahead.
Here is something I have found VERY valuable. There is the greatest bunch of helpful folks on the Yahoo REIT boards. I mean these guys are securities lawyers, general managers, CFOs and CEOs helping out the small guy...while making their securities more attractive. The CEOs of MAA and MNRTA regularly drop by and take questions...I have learned so much there....I really recommend it. It's not as clean as here...but how each person uses their words tells you whether the person is profane/ignorant or good hearted/intelligent.
What REITs are you guys looking at?
Tnx!
Bruce