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Bruce7b

Bruce7b
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  • ModernGraham Valuation Of Realty Income Corp. [View article]
    Marissa: C corporations often own exactly the same type of buildings as REITs. For example, McDonalds owns the land and buildings of many of their restaurants. Other companies own many of their office buildings and warehouses. These companies could just as easily rent all their space through REITs. Many of these buildings often appreciate in real value just like your condo but for tax and earnings purposes are depreciated. FFO (if used to compare with the market's PE--as many investors do) is flawed because of that different treatment. If we ignored McDonalds artificial depreciation/appreciation they would have higher earnings and a lower PE. Of course, some c-corporation depreciation is real just as some REIT depreciation is real. My guess is that your ex condo won't be there in 75 years--it too will start to actually depreciate at some point.
    Dec 26 11:32 AM | 1 Like Like |Link to Comment
  • ModernGraham Valuation Of Realty Income Corp. [View article]
    "PE has no meaning for REITs". I see that statement on SA on a regular basis. But if you check out MSN Money, Yahoo Finance and Morningstar you will see PE used throughout their REIT analysis. Not a mention about FFO do I see (cash flow is mentioned if you dig a little). So why do these sites use a PE that has no meaning?

    I understand the argument that the REIT industry uses---that depreciation is so large with REITs that the PE number has no meaning. That makes sense but all companies have depreciation and most have buildings that are depreciated. So how do you compare an FFO number for a REIT to PEs for non REITs that haven't been adjusted for depreciation? And how do we identify what portion of REIT depreciation is real--obviously some of it is--how many abandoned outlet malls and old shopping malls are torn down on a regular basis?

    What is surprising to me is how blindly SA readers (and REIT writers) accept the REIT industry standard without question. What is an expensive number for FFO? I don't know but I am thinking it is less than the PE for non REITs. Maybe we should expect our REIT writers to put a little more effort into their analysis.
    Dec 25 09:22 AM | 3 Likes Like |Link to Comment
  • One ETF Replaces Your Dividend Growth Portfolio [View article]
    UP: If you are talking about actively managed funds you would be right to worry but with an index fund (ETF or open end) they will seldom realize capital gains unless the stock leaves the index. They buy and hold forever unless there are big withdrawals. That is why index funds are so tax efficient.
    Dec 19 09:54 AM | 2 Likes Like |Link to Comment
  • Near A Market Top? Then Buybacks Aren't So Smart [View article]
    If buybacks aren't so smart then reinvestment of dividends would seem to be equally dumb. And I guess investor purchase of stock at these levels would also be dumb.

    Sometimes corporations have the same problem as us investors--there aren't always perfect choices. Many CFOs probably see overcapacity in many (most) industries--thus the reason we have had no real inflation for many years. So expansion probably doesn't make sense for most corporations. Acquisitions at these levels isn't any wiser.

    Buybacks might be the best of poor choices--at least they are tax efficient for some investors. If the market goes up another 20% this year, as many are forecasting, buybacks will look like the smart move.
    Dec 14 12:08 PM | 1 Like Like |Link to Comment
  • One Piece Of Advice For 2014: Be Skeptical [View article]
    Ted: I think there are some investment research sites where both the pros and cons are offered and there is no obvious conflict of interest issues. I use both Morningstar and Value Line. Not saying they are always right but I think they are as objective as possible. Plus many public libraries provide the information for free. North Carolina offers the Morningstar on line for free with information on stocks, ETFs, Open and Closed End Funds. My guess is some other states do the same. Yahoo provides much good info including corporate governance ratings.
    Dec 13 04:23 PM | 2 Likes Like |Link to Comment
  • President Obama: Lift The Ban On Crude Exports [View article]
    Michael: Let me take your excellent idea and take it one step further. We have all read Charlie Munger's ideas about not developing our oil resources--that they will be worth far more 50 years down the road. I'm not sure he is right (since I believe that solar will provide an ever increasing amount of electric power and natural gas will provide a dramatic increase in transportation fuel) but assume he is right. We currently have a Strategic Petroleum Reserve of some 700 million barrels of oil. The main purpose of that reserve is for defensive purposes--we don't want Russia and OPEC countries to have the ability to shut down our economy based on policy differences. What if we had a second Petroleum Reserve? Instead of a strategic reserve we could call it an Economic Petroleum Reserve. Instead of OPEC controlling the price of oil, this reserve might allow us to control the price. What if this reserve was some 2 billion barrels of oil and it was all light crude (thus mostly produced in the US). What are the benefits? We get all the benefits of increasing production in this country (employment, taxes, profits). We reduce the control of the oil cartels. If we assume Munger is right we make a wise investment that will pay off down the road. We might also encourage the refiners to invest in additional capacity in the light crude area. What are the downsides? 2 billion barrels requires an up front investment of some $200 billion dollars. Increase the gasoline tax by 25 cents.
    Dec 9 07:04 PM | Likes Like |Link to Comment
  • REITs: The Best Of Times, The Worst Of Times [View article]
    Mister J: Then you don't think REITs are primarily held in tax deferred accounts? Do you hold your REITs in taxable accounts?
    Dec 9 03:11 PM | Likes Like |Link to Comment
  • REITs: The Best Of Times, The Worst Of Times [View article]
    Adam: A number of recent comments have questioned whether tax loss selling really happens in the REIT world, thinking that most REITs are held in IRAs and 401ks. Other REIT writers have ignored those comments. Do you want to take a swing?
    Dec 9 03:05 PM | 1 Like Like |Link to Comment
  • You Don't Use A Benchmark?! It's About Opportunity Cost [View article]
    Connor: Vanguard (and other large mutual fund companies) has a series of target retirement funds in five year increments (currently 2015 to 2060). They are composed of low expense Vanguard index funds. They each include US stock, foreign stock, US bonds and foreign bonds. As the fund gets closer to the target it's investment mix becomes more conservative. I don't own the fund but it would allow an investor the easy option of making the one choice (say when they are 30 years old) and hold it for 50 years. Low cost, low hassle. Good return historically. I just use it as a benchmark--not really based on a retirement date but based on a mix of bonds/stocks/foreign that approximates my portfolio. I struggle to beat the returns of the fund. I am guessing that 90%+ of investors will under perform these funds over a lifetime.
    Dec 8 03:48 PM | Likes Like |Link to Comment
  • Barron's 2013 And 2014 Top 10 Picks: Do You Get The Message? [View article]
    All the comments seem to agree with your conclusion on why the Barron's 2013 list outperformed. Let me play the role of the devil's advocate. The dividend yield of the 10 stocks is 2.27% which is just barely above the S&P 500 current yield of 1.96%. Remove Shell and the average dividend of the other nine stocks falls below the S&P average. The two largest gainers (WDC and VIAB) had yields of 1.5% and 1.6%. Other than Shell, none of the 10 stocks would seem to qualify as a dividend growth stock. I would suggest that you were right about valuation being an important driver but your argument that Barron's performance was the result of selecting high dividend and dividend growth stocks sounds like wishful thinking of the DGI crowd.
    Dec 8 01:51 PM | 3 Likes Like |Link to Comment
  • You Don't Use A Benchmark?! It's About Opportunity Cost [View article]
    Connor: Think you made one bad assumption in your article--that DM's $5,000 in annual dividends is the total return of his portfolio. I think he is saying that the $5,000 is the dividend return and he doesn't address the appreciation--of which I am sure there is quite a bit since dividend stocks have been bubbling in the last 5 years. Why someone 10+ years away from retirement would focus on dividends and not total return is another question.

    I agree with you that a benchmark is important but don't agree that the S&P 500 is necessarily the correct one. All mutual funds compare their results to a benchmark (s) but the benchmark is one that approximates what the fund is investing in. So a bond fund doesn't compare against the S&P 500 nor does a fund that invest in the stocks of emerging markets. I compare my returns to a benchmark each year but the benchmark has changed as my portfolio and goals have changed. So now I use the Vanguard 2020 retirement fund as a benchmark. Maybe DM should select a good dividend ETF or open end dividend mutual fund as a benchmark. Then he mighty ask himself the same question that I do--if I under perform my benchmark on a regular basis is my investing system working? And I should concede defeat and just invest in the benchmark.

    You can say that there is an opportunity cost in not being invested in the S&P but you could just as easily say there is an opportunity cost in not being invested in emerging markets.
    Dec 8 07:53 AM | Likes Like |Link to Comment
  • Right Now Is The Wrong Time To Be Buying Healthcare REITs [View article]
    Be here: Very good question. I hold most of my REITs in an IRA so I wouldn't benefit from tax loss selling. I am pretty sure that all of the dividend that equates to the taxable income of the REIT is a non qualified dividend but that many REITs greatly increase their dividend by returning capital (some well over 50% of their dividend) which could logically be held in a taxable account since it is not immediately taxed and results in capital gain down the road (by decreasing basis equal to the ROC). So when I bought CCG I placed it in my taxable since almost all of the distribution is ROC. Wonder what percent of REITs are in taxable accounts?
    Dec 4 07:39 AM | Likes Like |Link to Comment
  • Right Now Is The Wrong Time To Be Buying Healthcare REITs [View article]
    Factoid: As usual a lot of good data (more than most of us can absorb) but it is not clear to me how the data supports the title--"wrong time to be buying". Using VTR as an example--their share price will not rise in the next four weeks from the artificial impact of window dressing since they are way below their high for the quarter/year. And their share price (if it reacts at all) should drop from tax loss selling since many will have purchased at 10-20 points higher than the current price and want to take a tax loss. It would seem that the perfect time to buy VTR is over the next 19 trading days--the only question would seem to be which of those 19 days will VTR bottom? I don't know so will make multiple small purchases over the next two weeks. There seems to be some evidence that December 15 is the typical bottom for tax loss selling but I have never seen any research to support that.
    Dec 3 07:40 PM | Likes Like |Link to Comment
  • Challenge-Do Not Overlook These Future Dividend Challenger Stars-Part 3 [View article]
    Rudester: I wonder if you are right about institutional investors selling for tax reasons. Pension funds and endowment funds don't pay taxes. Index funds are forced to hold the stocks regardless. I am guessing that hedge funds, like mutual funds, don't really worry about the impact of taxes on their customers since it doesn't impact them much and their results are compared to before tax returns. . So what is left in the institutional area that would worry about taxes? Maybe we have some experts out there who can answer the question.
    Dec 1 07:20 PM | Likes Like |Link to Comment
  • Challenge-Do Not Overlook These Future Dividend Challenger Stars-Part 3 [View article]
    Chuck: Small point on your premise that there is "no end in sight" to retirements as the baby boom generation starts to reach retirement age. That's the thing about us baby boomers--there is an end in sight. Most would credit the boomers as those born between 1946 and 1964--some 19 years but the peak births occurred in 1957. We have been like a bulge in the system--something like a python that has swallowed a pig but just like that pig we will come out in the end. I remember high school in Alexandria, Virginia where we had classes in the hallway and trailers brought into the parking lot to hold us students. We had the same impact on the housing market, job market and now the retirement market and soon we will have the same impact on the cemeteries. Already we are a few years into the boomer retirement phase so the end IS in sight.

    Another point is that there wasn't much immigration (legal or illegal) in those baby boom birth years. There is now and that will smooth out (or eliminate) any real impact. Investing for some large change caused by baby boomer retirements might be a waste of time and money.
    Dec 1 08:43 AM | 1 Like Like |Link to Comment
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