REITs work as averages slide and bond yields fall


Working today as both stock and bond yields fall in response to banking troubles in Portugal are both equity and mortgage REIT names.

Leading in the mortgage REIT sector are Annaly (NLY +0.8%) and American Capital Agency (AGNC +0.8%), and a sampling of equity REIT names: Realty Income (O +0.6%), Omega Healthcare (OHI +1%), Ventas (VTR +1.2%), Medical Properties (MPW +1%), Avalon Bay (AVB +0.5%), Simon Property (SPG +0.8%), Boston Properties (BXP +0.8%)

ETFs: IYR, VNQ, DRN, URE, SRS, ICF, RWR, SCHH, DRV, KBWY, REK, FRI, FTY, PSR, FNIO, WREI, REM, MORL, MORT

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Comments (7)
  • James Bjorkman
    , contributor
    Comments (2778) | Send Message
     
    REITs have been a buy all year.
    10 Jul 2014, 10:35 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11220) | Send Message
     
    I've been saying since the day of the Rose Bowl...yields will keep falling in 2014 and the mREITs are total bargains.
    10 Jul 2014, 11:57 AM Reply Like
  • Alan1967
    , contributor
    Comments (241) | Send Message
     
    I'm wondering if I should take some profit on my $OHI. Bought at $24 and now with it at $37 it seems to be a bit ahead of itself. The dividend is nice, but I'm wondering what the REITs will do when interests rates start to rise.
    10 Jul 2014, 12:38 PM Reply Like
  • tstreet
    , contributor
    Comments (1035) | Send Message
     
    It was just a few days ago that MREITs took a beating apparently in response to good employment numbers. Guess they don't matter anymore.
    10 Jul 2014, 01:04 PM Reply Like
  • William Packer
    , contributor
    Comments (1076) | Send Message
     
    tstreet, Portugal has issues.. buying bonds last week was all about the fear trade. That trade should unwind next week and the 10 yr bond should move back to the 2.60 to 2.70 range. The jobs report was very strong and it proves to me that rates will be going up over time. When the rate panic sets in, rates could go as high as 4% on a 10 year bond before leveling out at 3.5%. So we are definitely looking at an up 100 bp situation over the next year. Book values will drop on agency-only names - but increase on hybrid names like MTGE due to the appreciation on the non-agency mortgages and MSRs. By the end of 2016, rates could tap 5% on a 10 yr bond, but most likely trade between 4.35% and 5.25%. This assumes that there is no major event to throw the economy off track significantly. For this reason, I have a 4 contract short position on the 10 year treasury futures @ 2.51% yield. I don't have a stop-loss in place, but I have paired it up with 21,500 shares of MTGE and 215 Sept $20 MTGE calls.
    12 Jul 2014, 12:13 PM Reply Like
  • tstreet
    , contributor
    Comments (1035) | Send Message
     
    MTGE did very poorly last year when there was rising rates and fear of rising rates. What will be different this time?
    13 Jul 2014, 07:33 PM Reply Like
  • William Packer
    , contributor
    Comments (1076) | Send Message
     
    Tstreet, look at book value of mtge at 6-30-2012 and then look at book value as of 3-31-2014. There are basically the same yet rates went up 100 basis points. The issue with MTGE isn't the managers performance.. It's just being hurt by the p/b discount. People fear what they don't understand. MTGE is being lumped in with the other MREITs.
    14 Jul 2014, 10:47 AM Reply Like
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