Buys and Sells.
I've been decreasing my cash and increasing REITs (HCP, PPS, BXP). This despite REIT indexes approaching their 52 week highs. I'd rather take a 7% yield with risk of capital loss than receiving 2% on cash. I'm concerned that many REITs are forecasting flattish 2002 FFO over 2001... for example, Equity Residential (EQR). However, I also think the markets don't seem to be putting enough of a premium on yield. Approximately 1/3 of the S&P500 companies have dividend yields in excess of cash. 27 S&P500 companies yield in excess of the 10 year bond. I figure another year like the last two and the high dividend REITs should get more attention from income-seekers.
I bought a starter position in Washington Mutual (WM). Both Bill Nygren and Wally Weitz touted it in the 12/24 issue of Outstanding Investor Digest. It's hard to believe a $29 billion thrift is a bargain, but I consider this less a bargain than a cash alternative. I again passed on Wells Fargo (WFC). I looked at it on 10/29/2001 when it was available below $40.
I'm looking at energy, but I haven't done anything. It seems likely that another energy merchant will go bankrupt due to investor lack-of-confidence, and that would seem to be a better entry point. Mirant does look interesting at 6.5x 2002 earnings.
I sold (tax-free) Dun and Bradstreet (DNB) after Buffett exited. I wasn't tempted to sell before because earnings growth of 9% seemed plausible on a 2002 PE of 17. However, if WEB is willing to take a taxable gain, I better not tempt the market gods to punish me for lack of humility. I had a 63% annualized return since 5/2000.
I also sold tax-free Harte Hanks (HHS) at $28.52, bought last January at $22. 2001 earnings were 7% less than expected and I had a 29% annualized gain.
I sold tax-free Servicemaster (SVM) at $13.84, bought at $10.13 in July 2000. Again, disappointing earnings in the face of 23% annualized gain. The CEO seems to be making the right moves but the results have not followed.
Ditto for Newell Rubbermaid (NWL). Sold at $27.28, bought at $19 and $26. Disappointing earnings results with annualized gains in the 20% range.
Sold the last of long-term taxable Pep Boys at $15.49, bought at $3.69 in 12/2000. 1/2003 eps of 77c is too lean for me.
Pared down my losing Kroger (KR) holdings (bought at $22-25) down to my only profitable lot (bought at $14.50 in 2/2000). I have a full position in Safeway (SWY). I feel I'm being contrarian enough taking the position that Safeway can prosper despite the continued entry by Walmart and Target grocery hypermarts.
I may trade KMart (KM) but I haven't bought it since my $6 to $9.75 trade last year. |
