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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (21868)	8/9/2005 12:08:55 AM
From: E_K_S	Respond to of 78667

Hi Spekulatius - The problem I have with any REIT is that their dividend payout to shareholders is not treated as a "qualified" dividend (taxed at a maximum of 15%) but rather is treated like ordinary income and taxed accordingly. Same goes for any interest earned on cooperate bonds or dividends from ADR's. Therefore, IMO, the REIT investment returns must be discounted for this tax rate differential. Once this adjustment is made, the after tax returns on REITs is just OK. If you are looking for a good "qualified" return, I always come back to SFL a new company set up to provide long term financing for oil tankers. In many respects it's very similar to a REIT but it is a revenue stream based on the lease agreements for the use of oil tankers not apartments. Many of the other shipping companies provide qualified dividends (you must make sure they are not ADR's) and reflect income from the leases of these assets. The nice part is that the maximum tax rate is 15%. =============================================================== I was looking at the 5 yr. returns on many of the natural resource companies including integrated oil (XOM, BP, CVX), mining BHP Billiton Ltd (Australian minerals) and Timber (GP, IP, WY). I was surprised to see that all except for timber seem to show pretty good growth. It appears that the rise in price of many of these commodities (oil, copper, ore, coal, grains) track the rise in the company stock price. This may be the result that many of these companies own the physical proven reserves and the market has priced them accordingly. For example: 5 yr. chart XOM: (up 100%) (http://finance.yahoo.com/q/bc?s=XOM&t=5y&l=on&z=m&q=l&c=) 5 yr. chart BHP: (up 300%) (http://finance.yahoo.com/q/bc?s=BHP&t=5y) I have two observations: (1) timber resource valuations have lagged this commodity price trend increase (i.e. lumber has increased but paper companies have not increased in price as much (if at all). and (2) The infrastructure to remove and deliver these natural resources to the end user have lagged in price (i.e. caterpillar, deep drilling oil rigs, transportation trains & ships). Is there a value play somewhere in this theme? On several valuation matrix, the companies that own the natural resources are fully valued but those that provide the products or services to deliver these resources to the end user or manufacturer have yet to benefit. We have discussed several small caps that were undervalued (like JLG) but have already run up in price. Can you suggest any others? My evaluation seem to always lead me back to the shippers. Finally, I do not think that the current way our government calculates the CPI (or PPI) begins to reflect the "real" cost of commodities (oil, minerals, timber) that are demanded by global consumers today. Just more food for thought . . . EKS

To: Spekulatius who wrote (21868)	8/9/2005 12:15:55 AM
From: itilis2003	Read Replies (1) \| Respond to of 78667

RTU addresses some of your issues in its latest quarterly report . And the best I can tell, they are not margined, but rather 41% in REITS, 42% in utlities and 17% in preferred stocks & debt. Another option, I guess is ZTR but I dont believe its discount is as steep. Both have the level rate distribution policy which can involve a return of capital. Does anyone know where to find the discounts on the other closed end funds ? I know its in Barrons, but I dont subscribe.