Post-Election Sell-Off Accelerates, But A Buyable Moment Is Approaching

Includes: CLDT, KRG
by: Bret Jensen
  • Compromise: a settlement of differences by mutual concessions; an agreement reached by adjustment of conflicting or opposing claims, principles, etc., by reciprocal modification of demands.
  • Escalation: to increase in intensity, magnitude, etc.

The market accelerated its post-election sell-off Wednesday after the president's press conference as the communicator in chief demonstrated his inability to differentiate between "compromise" and "escalation." The president staked out a position of wanting to double the amount of taxes that were agreed to during the failed debt talks of 2011. He also did not outline any spending or entitlement cuts that his party was willing to put on the table.

Some posturing should be expected in front of the closed door sessions that are to take place Friday on the "fiscal cliff." However, having both sides digging in their heels publicly before the talks certainly is not helping market volatility or investor confidence at the moment.

"We recommend that no Hamas operatives, whether low level or senior leaders, show their faces above ground in the days ahead." Israel Defense Force Twitter message yesterday.

The other big source of volatility in the market was Israel responding to Hamas launching a continuous stream of rockets into Israeli territory from Gaza by taking out the head of the military wing of Hamas in a spectacular rocket attack that incinerated the car carrying this leader. This caused the already volatile region to get even tenser as Egypt and other countries weigh in and it did not help the overall tone of the equity markets either. I will give it to Israel, it simply does not mess around with its enemies.

Today the market will have to overcome the news that the European continent has officially double-dipped into another recession. Obviously this was not altogether unexpected, but it is still an important overhang on market sentiment.

All this being said, I think we are getting closer to a buyable moment in the market which should trigger at least a short term rally as it feels as the market is approaching oversold territory. I even closed out some of my shorts just before the market close Wednesday. In addition, I added to some of the high yielding plays in my income portfolio as these dividend stocks have been hit hard since the election as investors take profits on these positions to avoid the higher taxes on dividends and capital gains that are coming in 2013. One of the places I put some new money into yesterday was commercial real estate including Chatham Lodging Trust (NYSE:CLDT) which I have profiled before. I also added to Kite Realty Trust (NYSE:KRG). I believe that in the slow growth, higher inflation environment I see over the next few years that hard assets that throw off cash flow and dividends will be good places to allocate money into.

Kite Realty Group Trust is a publicly owned real estate investment trust. The firm invests in real estate markets of the United States primarily shopping facilities.

4 reasons KRG is a good income play at just over $5

  1. KRG provides a yield of 4.5%.
  2. Analysts' project that revenue growth will increase to 12% next year as new leasing space comes on line. This should enable the company to increase distributions for the first time in a few years.
  3. The company has raised its operating cash flow by some 60% over the past three years.
  4. The stock is selling at just 7% over book value and less than 12x forward earnings. Bank of America recently initiated the shares as a "Buy" as well.

Disclosure: I am long CLDT, KRG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.