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REITs
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My general investment strategy after many years of finding what works for me . .Just FYI, I do lot based accounting where I accumulate shares in many stocks (over 65 positions in several accounts both taxable and tax deferred). I like to turn the taxable porfolio over every 5-8 years but still have a core holding of stocks that I have had for well over 20 years (and probably will never sell). I can not time the market but rather I am pretty good at identifying value, sector cycles and specific stock themes after over 35 years investing. When a new theme and/or value play presents it's self, I will sell some high cost shares (my lots typically bought first in a new investment theme/opportunity) of other stocks that I own where the theme/investment has moved at/near 52wk high and/or has reached my fair value target. I accumulate a position over months w/ as many as 5 different buys. Note Graham just did his buys all at one time and when fair value was reached, he closed out the entire position. I also keep two years of cash reserves in the account as a buffer for any significant market move (usually an extended Bear Market) which covers property taxes, insurances, utilities, food and all the other day-to-day needs. I add to this bucket from time to time harvesting long term capital gains and/or dividends to meet other specific future cash requirements (ie new car) or special one off investment projects (like real estate flip and/or addition). As I scan all the different stock lots I own, their multi-year performance, current dividend yield, fair value target and/or candidates that have not met my performance targets, I build a list that I use as "a source" of funds. It's never an all or none proposition unless it's a bet that has gone sour and I want to close the position and move on. FWIW, I also like to add to positions especially if in an industry that has long cycles that allows you to Buy in the bottom (typically a few years of losses) so you can peel off shares at/near the cycle top (TRTN & TGH in the shipping sector is an example of this). There are times where there are once in a decade/generation and/or dissruptive technologies that significantly change the investment landscape. Data Centers in the REIT sector is an example, online ecommerce and warehouse distribution centers as well as the introduction of the PC/Network in the 90's (and Internet). This I believe is/has been occuring w/ the new multi Trillion Trump Tax legislation that provides stimulas to domestic capital investment (years not months) that will lead to "huge" new capital investments. Finally, I always look for Graham undervalued opportunities that typically take 18-24 months to see a reversion to the mean EPS if/when new management makes the necessary changes to restore value. These are typically company specific events and some have more value opportunity than others. I am lucky to find 5 of these a year and are two year minimum commitments for my capital. In the REIT sector some/all of these value propositions can occur but because of the structure (by IRS tax code) is reflected in their relative dividend yield (risk/reward). The higher the dividend yield the higher the risk. If/when management fixes the problems (reduces risk) the relative yield falls (REIT price increases). Other common stock equities will follow the same risk/reward w/ their common dividend (many may actually eliminate their dividedn as part of their recovery strategy) but more often is the case that they have acquired too much debt and/or have a legacy product portfolio and/or legacy business that must be reset. So, for me it's peeling off some of the gains from previous winners and deploying those funds into new undervalued opportunities. There is no one correct way to manage a portfolio of stocks and/or every investor has different goals they want to achieve. My lane of confidence is (1) finding small cap companies w/ good management and getting in early, (2) finding mismanged companies w/ good assets and bring in new CEO to clean up the mess and normalize EPS, (3) identifying under performing sectors (or in cycle lows) buying the best of breed and riding out back to cycle high and/or (4) look for company specific problems/opportunity and see if fixes can be achieved through next generation disruptive technologies that may/could leap frog back to the top while increasing FCF well out into the future. Never get attached to any one investment and always scan for new opportunities. If/when I see a company is back to normalized earnings (typically look at past 10 years) and my investment/value thesis has been met (normalized risk/reward), it's time to peel off my high cost shares and get that money working in other candidate value stocks. Good Investing EKS |
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