The Trick Is Buying Before Prices Rise


  • Buying preferred shares isn't hard. It's a great technique to find some attractive risk-adjusted returns though.
  • Many investors don't get the trick to it. You want to buy before the price goes up. That way you can be in a positive unrealized total return.
  • If you entered correctly, you will often have your choice of opportunities for when to exit (assuming no global pandemic occurring right afterwards).
  • We don't always enter positions only to have a quick unrealized gain. It's fun when it happens though.
  • NYMTP and NYMTO rallied into our neutral range. This was clear because index cards include price targets.
  • This idea was discussed in more depth with members of my private investing community, The REIT Forum. Get started today »

Following reader feedback, we’ve enhanced the layout for this series (yet again!). Your continued feedback is greatly appreciated, so please leave a comment with suggestions.

This article will be heavy on charts because we like to communicate with images, rather than words, whenever possible. Likewise, we will use several tables to more efficiently structure the data. Enjoy!

Mortgage REITs and Preferred Shares

We’ve consistently incorporated a significant allocation to preferred shares in our portfolio. We could simply hold the positions for income, but we take advantage of trading opportunities as well. Our goal is to maximize total returns and this technique has worked wonderfully.

We also trade positions in the mortgage REIT common shares. We find this sector is particularly attractive because it can be so inefficient. Long term, share prices revolve around book value. In the short term, the price-to-book ratios can deviate materially. Simply by understanding that, you can put yourself in a better position.

Our other major source of allocations is equity REITs. While an investor might occasionally choose to trade an equity REIT position, the sector is a great fit for buy-and-hold investors.

We compare our performance against four ETFs that investors might use for exposure to our sectors:

Source: The REIT Forum - Chart runs through 12/31/2020

The four ETFs we use for comparison are:




One of the largest mortgage REIT ETFs


One of the largest preferred share ETFs


Largest equity REIT ETF


The high-yield equity REIT ETF. Yes, it has been dreadful.

When investors think it isn’t possible to earn solid returns in preferred shares or mortgage REITs, we politely disagree. The sector has plenty of opportunities, but investors still need to be wary of the risks. We can’t simply reach for yield and hope for the best. When

The REIT Forum utilizes over 5,000 hours per year in research. You can access that research for just pennies per hour.

To produce our research, we need to access several expensive data sources. Our total expenses now run over $100,000. If you want to duplicate our service, you'll just need several decades of experience, 5,000 hours per year, and over $100,000 for your budget. We use the time and money to provide a superior experience:

It's time to try our service.

This article was written by

Leader of The REIT Forum
Most of our subscriber articles never go to the public side.
You want to be on The REIT Forum because it is the #1 REIT research service on Seeking Alpha measured by returns. Period. See our Tipranks page. How did we get there? We did a better job of managing risk and discovering opportunities. We didn’t jump into trashy high-yield equity REITs with the rest of the crowd. We cover securities for trading and securities for the buy-and-hold investor. We are clear about the difference and that enabled us to perform better since inception and better in 2020.

Securities for the buy-and-hold investor generally carry much lower risk. If we enter a high-risk position, we plan to capitalize on a change in the valuation. We monitor those positions very carefully, rather than hoping everything turns out well over the next several years. That’s why we have so few losses in our investing.

We post our portfolio for you. You also get real-time alerts on every trade we place. Our reasoning for placing a trade is explained in clear English. You can even see the exact trades with the images we include from our stock accounts. We don’t offer you several different “portfolios”, instead, we show you exactly what we own, when we bought it, and how we are doing in that position. We make it simple for investors to follow our strategy.

You’ll find several reports on The REIT Forum that don’t get posted to the public side of Seeking Alpha. Many of our public reports are dramatically reduced versions of subscriber articles. If you enjoy our public articles, you’ll love the content we keep for subscribers.

Disclosure: I am/we are long AGNCO, NYMTM, CIM-A, AGNCP, ARR-C, NRZ-B, NRZ, AGNC, NLY, SLRC, GPMT, PMT, ORCC, CMO. 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.

Additional disclosure: As a reminder, Scott Kennedy also is an author for the REIT Forum. You may see his commentary featured in our articles and may notice an extremely high amount of overlap in our ratings, so subscribers reading this article should see Scott’s latest REIT Forum sector update for more detail.

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