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Strategies & Market Trends : Value Investing

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To: Grommit who wrote (33556)	2/19/2009 4:18:38 PM
From: E_K_S	Read Replies (1) of 78744

Hi Grommit - I have been thinking what the worst case could be especially if the economy continues to spiral down. I suppose tenants could stop paying rents which would impact cash flows. Some of the REIT companies may be forced to sell properties at losses in order to pay down their debt. We have already seen a few of the REITs do secondary offerings to raise capital. The cumulative preferred shares should be ok especially if you own the "superior" ones. Some of the REITs are paying dividends in stock which I do not like. Also, I have noticed that some of the preferreds are convertible into common stock at a set conversion price. I am not sure what happens to the specific conversion rate(s) especially if a secondary is done resulting in common stock dilution. I suppose one needs to read each of the individual offerings to cull out the specific details. Therefore, what I have been doing is buying a basket of these and switching out of my common shares on rallies. These preferreds are good to hold in an IRA as they spin off a good income stream. I agree with Paul that if the current lows are breached in the next several trading days (w/ options expiration Friday), we could see another substantial new low "trading range". This may provide the impetus for current long term holders of these preferreds to sell out, providing new "value" buyers an excellent entry point to lock in these high yields. There is a lot of negative sentiment at this stage in a Bear market. Psychology and emotion takes over rather than using disciplined fundamental value investing methods. If you can catch the REIT survivors by investing in their preferred series shares, I believe you will make a once in a decade "value" buy. Keep sharing your preferred picks (especially show the individual preferred series and current yield) as their relative yields are hard to monitor. EKS

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