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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (32725)	11/11/2008 1:15:34 AM
From: E_K_S	Read Replies (2) of 78644

Hi Paul - Any observations for value plays with today's announcement of China's $586 Billion stimulus plan? Maybe the shipping stocks will come back as China will need to continue their import of raw materials. If China plans to build their infrastructure, perhaps CAT and GE may be good candidates. NOVEMBER 11, 2008 China's Stimulus Plan Cheers Markets, But Doubts Remain online.wsj.com REITs got hit today too along with your business development companies. The most recent earnings were not that bad and many of the companies continue to make their dividends (except FR which was lowered). I guess the market is figuring that many of these REIT's will be impacted by a long protracted slow down in the US economy. The market expects commercial real estate values and gross rents to fall further as the recession gains steam. The key to buying value is finding cheap assets that over the long term generate consistent and growing revenue streams. Many of the shipping companies have accomplished this with long term contracts. My favorite is SFL (SHIP FINC INTL) (NYSE: SFL) finance.yahoo.com They have a diversified portfolio of ships and drill rigs with an average contract lease period of 15 years. The stock is yielding an incredible 17%. The stock carries a lot of debt but it is secured by their capital assets with their underlying long term contracts. I bought some more shares recently at this level. I guess the surprise would be if any of their long term contract deals fall through. Most of their agreements are with very large and profitable organizations. The other assets class that generates steady revenue streams (over the long term) is commercial real estate. I like many of the REITs but think the market will still sell them down. I will be adding to my recent small buys over the next six months in hopes I can accumulate the bulk of my shares near the lows. It just appears that things are going to get much worse (domestically) before they will get better. My approach is to work money into this market over time with set investment amounts. I am like a kid in a candy store but each time I come back to the counter, the price has been lowered. I continue to sell many of my higher priced shares into rallies and try to position the money into many of these lower priced assets. Cash is yielding a negative return but if the market continues to fall lower the new investor theme is: Why buy today if you can buy cheaper tomorrow . . . EKS

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