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Strategies & Market Trends : Bear!
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To: Michael Burry who wrote (41)5/3/1998 12:48:00 AM
From: James Clarke  Read Replies (1) of 271
 
I recommended Eastgroup (EGP) and Colonial (CLP) in my last post. Let me be clear, these are defensive picks. I do not expect the share price to rise appreciably. But they won't fall with the market either, and they pay a generous yield regardless of what the market does. I look at these as safe 7.2% dividend yields vs. a long bond at 6%. Most investors today believe dividends don't count (which tells me that dividends are probably more valuable than ever!), and that a 7% return is trivial. I disagree, especially because a portion of the dividend of these REITs is taxed as a return of capital (i.e. a deferred capital gain). I would not expect these to correct in a correction nor crash in a crash, so this is the way I play defense.

If you want to play offense you want to take a good long look (it will take some homework) at Public Storage (PSA). I think this company is McDonalds in the early 70s, but it gets valued as a REIT rather than as a business. And even as a REIT is is misunderstood.

Jim
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