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No. of Recommendations: 15
One of the difficulties I have with our favorite investment sector is that the pool is not filled with similarly minded people.

So when I read posts that evaluate how well many of our well known REITs are doing, I feel good. We see top shelf management teams, very reasonable debt loads, high occupancy rates and solid fundamentals, with no harsh weather on the immediate or intermediate horizon. Yet, we have seen many REITs selling well off their highs.

Two cases in point. O was as low as $44.65 earlier today, some 19.6% off its $55.54 high. HCP was down to $37.18 which is 25.1% below it's $44.65 high. This morning I read the beginning of a Barrons article that said REITs are sitting on the edge of a cliff awaiting a push. I cant link the article as it requires a sign up to see the rest of it.

I like to understand what makes a business work well. It disturbs me to see a company being well run but trashed or tossed aside for reasons not directly related to what they do. I am not talking about REITs that are far out on the risk branch with high debt loads, low occupancy rates or governance that is not investor friendly.

If the fed does raise rates, nobody is seeing them going to 4-5%? Is a rate of 1-1.5% so catastrophic to their business models? IOW, the question should not center irrationally on IF there is a rate increase coming, but how much are the cumulative hikes likely to be.

There is always talk of a market correction. How many times in the last few years have we heard that? REITs have already been through a correction. Are they really a sector that is totally unworthy of investment in such an environment? Shouldn't the good ones be more than able to manage their way through the current and anticipated situations? The sector is one that should be in most reasonably assembled portfolios. Is it simply those who move in and out for reasons totally unrelated to the fundamentals far outnumber those who do? What is the rational way to play this? Does one just hunker down?

My REIT holdings are about 1/3 fewer than they were. I don't hold any high risk or marginal players. I only have two current preferreds which is way down from my prior level of holdings. I never felt that REITs were excessively overvalued. My sales were generally near the highs, although some went higher after my sale. The ones I held onto have seen their gains mostly disappear. However, I still like them as businesses and investments.

I guess I am looking for the collective wisdom here to chime in with their $.02 on the subject. In the last 20 years or so there has not been a time when I did not own any REITs. My holding percentages have varied a bit over the years. Also, there were a few times when I was totally out of preferreds as where we were in a particular cycle drove the decision to buy, sell or hold. Broadly speaking, preferreds are an easier animal to analyze and develop a strategy for. REIT commons today are not.


BG
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