REITs - Real Estate Investment Trusts - Info & Discussion
- RhyneN
- JenL_2
- bob90245
- RhyneN
- mitelo
- KLR
- mitelo
- RhyneN
- RhyneN
- Kirk
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» RhyneN - Re: Re: Re: Preferred approach?
In response to message posted by bob90245:>>Is there evidence that a REIT index fund will outperform the average REIT mutual fund?<<
One major difference between REITs and other stocks when evaluating the question of whether a good mutual fund manager can beat the index is the number of REIT stocks. Fund managers usually use only equity REITS because mortgage REITs are completely different and to a great extent a play on interest rate changes. I don't know the exact number of equity REITS. The NAREIT Equity Index has 158 companies, which is surely all of them of any significence. A REIT mutual fund manager can easily follow, to some degree, all REIT equity stocks. In reasonably short order he can eliminate some from the universe he follows because he may decide he does not like the management, or the REIT has a higher percentage of debt to equity than he feels comfortable with, or he doesn't like where the properties are located, or other reasons.
There are several REIT indexes, but information on the yields to various dates is not easily available. So I look at two index type mutual funds that I have three year information on (thru 6/30/01). Vanguard REIT Index,which is similar to the RMS, which returned annualized 5.42 a year during that 3 years It has a very low expense ratio which I mentioned in my first reply to you. I believe it is 0.33%. Wells S&P REIT, which follows the S&P REIT Index, returned only annualized 3.83% in the past three years. There are several actively managed funds that beat both of them. Let me use one as an example. Undiscovered Managers REIT mutual fund returned 9.57% in the three year period and beat these two indexes significantly. For the trailing 12 months Vanguard did 22.75%, Wells did 24.8%, and Undiscovered Managers did 23.03%. But for the first six months of 2001, Vanguard did 10.11%, Wells did 10.14%, and Undiscovered Managers did 6.99%. The difference in 2001 has been the run up of a lot of second tier REITs because their yeilds at the beginning of the year were much higher than the first tier REITs that you typically find in the more concentrated REIT mutual funds.
I personally believe that a good REIT manager can consistently beat the overall REIT indices - but not each and every year.
>>Is the expense ratio for the average REIT mutual fund appreciably higher than the index?<<
Yes, no doubt about it, mostly 100 basis points or more higher.
-- posted by RhyneN
» JenL_2 - REITs - Bear Market Silver Lining?
These excerpts from 8/22 Getting Technical column in Barron's (REIT Chart added):The Bear Market Has a Slim Silver Lining
By Michael Kahn
For weeks, Getting Technical has been pointing out the less-than-inviting landscape in the stock market -- so much so, in fact, that we have probably sounded like a broken record at times (or a broken CD, for people who are too young to remember Lps).
But so far, events have vindicated our skeptical stance. On Tuesday, the Federal Reserve came through with its seventh interest rate cut of the year -- only to be greeted by a Bronx cheer from the equity markets, which promptly sold off.
Coming on the heels of last week's trading range breakdowns by the Nasdaq Composite index and the Standard & Poor's 500, it may be just a matter of time before other indexes, like the S&P 400 Midcap index, follow suit.....
(clip)
OK, so where is the silver lining?
In the short run, lower interest rates are having a positive effect on housing as the homebuilding sector has been a market leader. Real Estate Investment Trusts (REITs) continue to do well, and the Dow Jones Equity REIT Index scored an upside breakout two weeks ago.
<img src="http://chart.bigcharts.com/bc3/intchart/..." width=579 height=335>
RMS vs S&P500 3 YR Chart
(clip)
....The point is, there are opportunities within the current bear market in the indexes in the oil sector, real estate and gold. Notice the theme of natural resources and hard assets? Even forest and paper stocks have done fairly well over the past few months.
Just remember that the bear has not yet gone away.
Michael Kahn is Chief Technical Analyst for BridgeNews http://www.bridge.com and the author of two books on technical analysis, most recently Technical Analysis: Plain and Simple. He is also Director of Marketing for the Market Technicians Association http://www.mta.org and can be seen regularly on such financial news broadcasts as PBS's Nightly Business Report and Yahoo! Finance Vision http://www.vision.yahoo.com Subscribe to WSJ & Barron's Online @ http://www.wsj.com
.....Jen
-- posted by JenL_2
» bob90245 - Re: REITs - Bear Market Silver Lining?
In response to message posted by JenL_2:<< The point is, there are opportunities within the current bear market in the indexes in the oil sector, real estate and gold. Notice the theme of natural resources and hard assets? >>
Which can mean only one thing. Inflation!!
To wit:
“Indeed, the minutes [of the June FOMC meeting] show that St. Louis Fed President William Poole — a notorious inflation hawk — went so far as to dissent against the bank's quarter-point rate cut (in favor of no action) on June 27, arguing that more rate cuts raised "an undue risk of fostering higher inflation in the future."
-- posted by bob90245
» RhyneN - The REIT run continues, barely!!!
The Morgan Stanley REIT Index (ticker RMS) extended its string of “up” trading sessions to 17 of the last 18, with only one down day this month.The Morgan Stanley REIT Index closed last night at 421.62, up 0.08 or 0.02%. It was another new closing high. RMS also set a new all-time high yesterday, 421.91. The low for the day was 420.72.
Of the 110 companies that comprise the widely followed benchmark, 45 finished up, 58 down, and 7 were unchanged. Year-to-date through yesterday’s close, RMS (which is a total return index with dividends included) had posted a 15.2% total return. The average dividend yield on RMS at yesterday’s close was just under 6.6%.
Cohen & Steers Realty Majors, which is a benchmark of large-cap REIT performance (ticker RMP), also finished up, yesterday. RMP’s high yesterday was 367.42, and its low was 356.86. The benchmark closed up 0.59 or 0.16% to 367.36. Neither yesterday’s close nor RMP’s high for the day were new highs. The index’s all-time high is 367.46, set on August 21.
Of the 30 companies that comprise Cohen & Steers Realty Majors, 17 were up; 11 were down; and 2 were unchanged on Thursday. Year-to-date through yesterday’s close, RMP had posted a total return of 13.7%. (Like RMS, RMP is a total return index; dividends included). The average dividend yield on RMP at yesterday’s close was 6.0%.
-- posted by RhyneN
» mitelo - SPG
Simon Property Group is a REIT with shopping mall interests. The stock has been strong in the past 6 months.My observation is that shopping malls around the mid-west have a lot of empty stores including some large vacancies like old Ward's stores and Albertson's closed stores and a lot of vacancies from closed specialty stores like coffee bean dealers and small clothiers. Is this a sign of the bottom? Or, is the real estate investment realm hanging on from the last few whiffs of the declining interest rate environment "tail wind"?
I'm hoping the REIT stock strength is a better predictor of the near future than the tech. stocks were in 1999.
----------
The insider trade information on this REIT looks a little bearish, unfortunately.
-- posted by mitelo
» KLR - Do the REIT thing
Do the REIT thingYield hunter James Stratton scores with realty funds
By Craig Tolliver, CBS.MarketWatch.com
Last Update: 4:03 PM ET Aug. 23, 2001
PHILADELPHIA (CBS.MW) -- Real estate funds are on a tear this year, reaping gains when every other sector fund category is nestled in the red.
As of Wednesday, real estate funds are up nearly 12 percent since the beginning of the year, according to mutual fund analyst Morningstar Inc. Only the small value diversified equity group, up 13 percent, and precious metals funds, considered an international play, up 14 percent, outpace the segment this year.
The $113 million Stratton Monthly Dividend REIT Fund (STMDX: news, chart, profile) has leaped ahead of its peers, sporting a 26 percent year-to-date gain. Over the last three years, the fund boasts average returns over 11 percent.
Generally speaking, real estate funds operate in a direct inverse to the Standard & Poor's 500 index, and Stratton is no exception, so it shouldn't be too surprising that these funds have picked up -- especially in a falling interest rate environment.
What has distinguished Stratton from the other players in the group is its attention to high yield. In fact, fund manager James W. Stratton argues that his fund shouldn't be viewed as part of another stock allocation to an investor's portfolio, but that it's more appropriate as a "bond substitute."...
-- posted by KLR
» mitelo - Re: Do the REIT thing or Do the RATE thing
In response to message posted by KLR:It is interesting that he said the REIT's "operate" in "a direct inverse" to the S $ P 500 Index. I guess he means they "move" in opposite directions. That is pondersome in view of his comment that a REIT fund is appropriately allocated as a bond substitute. Usually we think of a good bond market as a required precusor for a good stock market, and a very weak bond market as very bad for stocks. REIT's are vulnerable to much more than interest rates but by the same token can advance because of factors other than interest rates, ie. the dividends can be raised if the business is doing well.
REIT dividends are much more vulnerable than bonds. That is why many pay more than highly rated bonds. Similarly, some wonder why GNMA funds have returned less than Total Bond Index funds. The GNMA paper is all AAA, while the total bond index at Vanguard holds 18 % Baa paper. "You get what you pay for".
-- posted by mitelo
» RhyneN - REITs and the S&P500
The August 25th edition of Barrons discusses the possible addition of some REITs to the S&P500 index. Some years ago, those who determine the index decided that REITs were not operating businesses and chose to exclude them from the S&P500 index.Because of several tax law changes that allow REITs to be more like operating business, the question is being re-reviewed and a decision is expected in September or October.
A decision to include REITs would cause significant buying of those REITs selected to be included. The article indicates that REITs would likely occupy 70 basis points of the index.
The three largest REITs measured by market cap are EOP, in office buildings, EQR, in apartments, and SPG, in retail malls. Based on July 18th values, they made up 9.575%, 5.685%, and 3.827%, respectively, of the Morgan Stanley REIT Index.
This helps explain the recent strength of these three stocks.
Other REITs with large market caps are PLD, an industrial REIT, BXP, an office REIT, and PSA, in self-storage.These three made up 2.965%, 2.712%, and 2.696% of the RMS at July 18.
-- posted by RhyneN
» RhyneN - Bob90245 - Less volitile REIT mutual fund
In response to message posted by bob90245:Bob, the Vanguard REIT index, VGSIX, simply followed the REITs in 98 and 99 as investors abandoned REITs and chased technology. This created a great buying opportunity in REITS in October, November, and December of 1999.
Why don't you do a search at www.morningstar.com
They have a good Fund Selector Tool that non-premium-members can use. Choose Fund Selector. Then, under Fund Group, choose domestic Stock. Then under Morningstar category, choose Real Estate. Then under the other areas, tailor the search to your specifications.
Morningstar will show 74 no-load real estate mutual funds and a number of load funds unless your other choices reduce the number.
If you find a couple of funds you like, let us know. I am a premium Morningstar member, and I can look at the funds with you, if you like. As a premium member, I can get more detail about the funds.
-- posted by RhyneN
» Kirk - Re: REITs and the S&P500
In response to message posted by RhyneN:Hopefully Jen can post the REIT article. Sounds interesting.
I watched Wall Street Week with Louis Rukeyser last night and the guest was talking about how now is the time to sell defensive issues as they have had their run and money will flow to areas of the market that are less defensive as the economy bottoms and turns. He defined defensive issues as those with low P/E but good dividends (usually due to a mature industry or little growth). He did not mention REITs specifically, but they sure came to mind for me.
At this point in the stock market cycle, where equities are way down, interest rates are low and REITs and Bonds have had a good run, I would advise against moving equity monies into bonds or REITs (unless you are about to retire and want a more conservative asset allocation). Now that "they" are talking again of adding REITs to the S&P500, I'd look at it as a contrarian sign much as the untimely removal of RiteAID from the S&P500 and replacement with JDSU just before RiteAid doubled and JDSU went from $140 to $7.
http://stockcharts.com/def/servlet/SC.we...
When the market turns, people won't be as risk averse as they are now and so REITs will lose some of their appeal. Now if you are talking about moving some of your bond portfolio over to REITs, then that is an interesting idea worth discussion. REITs should pay a bit more than total bond or GNMA but the credit quality is not as high and the operating expenses (don't the individual REITs, even in an index, have fairly high management fees or at least property managers to pay?) are a consideration.
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-- posted by Kirk
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