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Update For Equity REIT Basket Strategy As Of 3/21/16

Mar. 21, 2016 10:18 AM ETGPT, STAG, VNQ7 Comments
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I am starting to pare my REIT basket based on my opinions about inflation and interest rates.

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This topic was last updated here: Update For Equity REIT Basket Strategy As Of 3/7/16 - South Gent | Seeking Alpha

I discussed reasons for maintaining an allocation to REITs here: Update For Equity REIT Basket Strategy As Of 7/24/15 - South Gent | Seeking Alpha (scroll to "Why Own Equity REITs")

I discussed interest rate cycles and REITs here: Update For REIT Basket Strategy As Of 8/11/15/Interest Rate Cycles And REIT Stock Prices - South Gent | Seeking Alpha (scroll to "Interest Rate Movements and REIT Stocks")

I am tracking realized gains and losses, along with annual dividend payments, here:Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy

Total Net Realized Gain Since September 2013 Inception: $6,286.28 (of which $1,195.61 has been in equity preferred stocks)

During the life of this basket, I believe that dividend income will swamp realized gains and will generate over 70% of my total return.

This basket strategy is in essence a mini-sector fund. The components are weighted based on a variety of factors unique to that basket, including valuations, dividend yields, dividend growth potential, and diversification objectives.

Basket as 3/21/16 (snapshot early morning in trading session)

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There are several reasons underlying the dispositions discussed below.

(1) I am reducing my REIT allocation and increasing my regional bank allocation in response to my opinion about a potential directional change in interest rates. The Bond Ghouls do not see any inflation risk over the next thirty years. I am taking a more nuisance and certainly contrarian view since there is already clear evidence that inflationary pressures are building in the economy. Consequently, I believe that bond market prices are not properly reflecting known and reasonably foreseeable interest rate risk.

Scroll to Interest Rate Movements and REIT Stocks: Update For REIT Basket Strategy As Of 8/11/15/Interest Rate Cycles And REIT Stock Prices - South Gent | Seeking Alpha

(2) I am about to inherit several REIT stocks and do not want more shares in several REITs that are currently owned by me.

(3) Several of the REITs sold or pared have shown topping action at the current prices and an inability to move much higher before turning back down. I am referring primarily to STAG and SRC.

STAG Interactive Stock Chart (trading near $15 in February)

SRC Interactive Stock Chart (trading near $9 in January)

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1. Sold 699+ Gramercy REIT (GPT) in Two Accounts:

I am about to inherit a GPT position and did not want more shares. The following lots were sold at $7.75+. It would have been better to wait a few more days to make this adjustment.

Schwab Account Elimination: +$133.52

Fidelity Taxable Account Elimination: +$52.98

I still own some shares in a ROTH IRA.

I owned Chambers Street Property. Gramercy merged into Chambers and then the name and symbol were change to Gramercy and GPT.

2. Sold 133+ STAG at $19.61

This brings me down to 240 shares excluding shares bought with dividends.

I used one of my commission free Fidelity trades to sell my highest cost 100 share lot profitably.

Trade Snapshot:

Profit Snapshot:

I last discussed STAG here:

Scroll to Item # 2: Bought 50 STAG at $15.75: UPDATE For Equity REIT Basket Strategy As Of 2/12/16 - South Gent | Seeking Alpha

I still own those shares. Averaging down and selling the highest cost shares on pops is a standard risk control trading technique here at HQ.

In this trade, I dumped my highest cost lot at $19.19.

Scroll to 1. Bought 100 Stag Industrial at $19.19: Update For REIT Basket Strategy As Of 8/24/15 - South Gent | Seeking Alpha

My tax cost basis for that lot was reduced slightly by ROC.

The 30 share lot was purchased at $17.31 shortly after the 100 shares:

Scroll to 2. Added 30 STAG at $17.31: Update For REIT Basket Strategy As Of 9/8/15 - South Gent | Seeking Alpha

I turned off the dividend reinvestment option for three monthly dividend payments.

3. Sold 10 VNQ at $83.36-ROTH IRA (Commission Free in Vanguard Accounts)

Profit Snapshot:

When one starts to flip a 10 share ETF lot, bought in two 5 share increments, consultation with some sort of head shrink may be in order or possibly a stock therapist.

I did general a short term capital gain of 9.5%, holding the position for about 6 weeks, which is another one to look at it.

4. Sold 154+ Spirit Realty at $11.17+ Roth IRA:

Trade Snapshot:

Profit Snapshot: +$66.92

Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics:ERROR CREEP and the INVESTING PROCESS. Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.

Analyst's Disclosure: I am/we are long GPT, STAG.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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