Dundee REIT on a long advance
Friday, May 11, 2012
I purchased D.UN a while back at $24.90. I’ve been very satisfied with the subsequent unit price appreciation and ongoing distributions.
However, I’m wondering if the stock has got a little ahead of itself and is perhaps due for for a pull back? Would be interested in hearing your thoughts on this.
Congratulations on a great pick! Your choice of Dundee Real Estate Investment Trust has produced a healthy capital gain and a stream of distributions that generates a 5.8 per cent yield. In the current low interest rate environment, where Government of Canada bonds offer substantially less, investors have been buying real estate investment trusts to meet their income requirements.
The real estate investment trust sector was spared the whip that fell on other businesses in the Halloween Massacre of 2006 when the Government of Canada changed how trusts were taxed. The Real Property Association of Canada and the management team led by Michael Brooks did a masterful job of communicating the industry’s position and avoiding the fate that crushed all the other business trusts.
A review of the charts will address your concerns about the units getting ahead of themselves.
The three-year chart does not indicate that the units have gone too far, too fast. Over the course of the entire advance there has been solid support along the 50-day moving average. There is resistance that comes in at $40.00. The all time high for the units is $45.07 which came in July of 2007.
The six-month chart is not generating any signals that the run is coming to an end. The RSI and the MACD are indicating that the trend still has some legs to it. But do observe the resistance at $40.00.
Here’s what I want you to keep in mind. I have always advised that if you are feeling uncertain about an investment, as you seem to be exhibiting, then you should go with your gut and throw to cash. When you are in cash you have taken the concern off the table and perhaps will see the situation more clearly.
You could miss further gains but profits foregone are soon forgotten, losses sustained rarely are.
Make it a profitable day and happy capitalism!
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