At Blue Harbinger, we generate our high income from many different types of investments in order to avoid the excessive damage when a particular style or sector takes a big hit. Big-dividend REITs have taken a big hit lately (we’ll explain why), and not only have we avoided excessive damage (our portfolios continue to perform extremely well), but we are seeing very attractive opportunities to buy low. This week’s Weekly, reviews the recent performance of all 65 of our current holdings (across our 3 separate portfolio strategies), and highlights a handful of very attractive big-dividend opportunities trading at increasingly compelling prices.
For starters, here is a look at the recent performance of all of our current holdings, and the underperformance of big-dividend REITs stands out over the last week, in particular. For example, see W.P. Carey (WPC), HealthPeak (PEAK), Welltower (WELL) and Realty Income (O), in the first table below (note: all data is as of Friday’s close 12/13).
(Note: a downloadable Excel spreadsheet of the above data, plus our watch list “contenders,” is available here. All data as of Friday close 12/13/19).
Why big-dividend REITs sold off…
REIT’s are a “risk-off” (or safety) asset class, that does well when there is a lot of uncertainty in the market (the theory is the dividends reduce volatility/increase stability and are based on long-term business contracts/leases). And on Friday, the Phase 1 US-China trade deal agreement encouraged market participants to take on more risk, thereby putting selling pressure on REITs (there was discussion that this was coming all week). Further, we have continued to receive healthy economic data (such as low unemployment and low inflation) over the last two months, which has also put selling pressure on REITs as investors become more confident and take on more risk. REITs had been doing extremely well this year, up until about two months ago, when the Fed gave us more certainty on monetary policy and interest rates too. REITs continue to have a strong 2019, just not as strong as they were doing a couple month ago.
The REIT environment remains healthy…
Despite the sell off in REITs in recent weeks/months, the economic environment remains great for REITs, and the sell off has created increasingly compelling entry points for buyers. Specifically, interest rates remain very low by historical standards, and this is good for REITs because they rely on the capital markets (borrowing, and low interest rates) to grow. And our continuing low interest rate environment is great for REITs, especially considering the economy remains strong. It’s basically a “fairy tale” environment for REITs right now (and that’s a good thing for investors).
Which REITs do we like?
You can see our current REIT holdings in the tables above, and you can see additional REITs on our “Contenders List” in the link provided below the tables. Also, if you check out our latest full investment reports, we’ve been writing a lot about specific REITs (e.g. Ventas, Monmouth, Brookfield) that are attractive right now. If you are an income-focused investor, and you are looking to rebalance your portfolio (and/or put money to work) REITs are currently particularly attractive.
The Bottom Line
If you put all of your nest egg in REITs, you are concentrating too much of your nest egg in one place. If you diversify across other types of investments—that’s a much smarter approach, in our view. And we’ve provided specific examples of how to do that by sharing our three investment portfolio strategies (see above, for example).
The last piece of “wisdom” we’ll leave you with is: don’t let the sensationalized fear-mongering media distract you from your long-term investment goals. People make mistakes by getting scared, leaving too much money in uninvested cash, and missing out on market gains (the Dow, S&P and Nasdaq closed at fresh all-time highs on Friday, despite REIT’s pullback, and despite non-stop “the sky is falling” headlines). Rather than getting scared now and selling all your REITs, be a contrarian and take advantage of the pullback, so long as it is consistent with your disciplined long-term investment goals. Be fearful when others are greedy, and be greedy when other are fearful.