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

To: Circle who wrote (5824)	1/22/1999 12:57:00 AM
From: James Clarke	Read Replies (8) \| Respond to of 78717

I posted a pretty in-depth post on REITs and nobody responded. I'm not complaining - the lack of response confirmed what I will develop below - that these stocks are in the "neglect phase". The sector is objectively cheap. There is asset value to back that statement up and to cushion downside in a bear market. Earnings still growing, and supported by long term leases. Plus a 7 or 8% dividend yield to keep you busy until they rebound. I am a very conservative real estate investor who did vulture real estate investing professionally through the bottom in 1993. This does not look like a top to me. There is not enough construction out there for me to be worried. Things were getting toppy during the summer, but the August shock scared away alot of the new construction, leading to what looks like a nice equilibrium in most sectors and regions. Another data point. Merrill Lynch ran a very insightful conference call on the group yesterday with the most respected REIT analyst and there were 70 call-ins. The analyst said that a year ago there would have been 200-300 callers. My point here is that a characteristic of a great value investment where you may be a little early (though here the dividend yield makes that less of a "risk"), is a neglect phase. That's where I believe we are with the REITs now. Investors, whether value or growth, are completely uninterested. But the companies just keep chugging along and producing healthy earnings. And their properties aren't going anywhere. You aren't going to hit homeruns in this sector, but a low-risk 10-20% move in a year on top of an 8% dividend is, in the words of a seasoned old value investor who signs my paychecks, "better than a sharp stick in the eye." I exited this sector for the most part last summer, but this is a place I will be putting money in the next few months. (and since I just bought a house - and now have to furnish the damned thing - if anybody knows of anywhere I can find some money, don't hesitate to e-mail me privately. :) ) JJC