Close of quarter
2CHYP had an acceptable quarter with performance fairly close to that of the REIT market. We do not have the exact numbers yet as the data sources take a business day to process. We like to pull the numbers directly from Interactive Brokers so that it is essentially verified by a third party.
It could have been quite a bit worse given the sharp falls in UNIT, SOHO, JCAP and even SNR, but some clever and/or lucky trading activity made up for the losses. Bailing us out were GOOD, WSR, IRM, IRT and FCH. In particular, I want to highlight IRT and WSR as the gains on those could not be obtained by passive investing.
Timing can matter significantly when investing and we were able to get cheap shares of these stocks simply by paying attention. IRT sold off due to a secondary offering of shares and WSR was down on hurricane fears. In both cases the market prices dipped well below stabilized fundamental value.
There was nothing groundbreaking about our analysis. It is not difficult to call a company and simply ask if their properties were damaged by Harvey and secondary offering selloffs frequently result in a rebound. It is simply a matter of being at our desks, always watching and ready to jump on opportunities as they arise. Conversely, this vigilance affords getting out of the way when things go wrong. SNR’s fundamentals began to deteriorate with tenant EBITDAR coverage dropping substantially and we were able to get out profitably before the market fully priced in the weakness. It is the advantage active investing will always have over passive investing.
Through these value captures along with the Felcor arbitrage and flip trades in IRM and GOOD we were able to mitigate the damage of some large positions crashing. Ideally, crashes of this nature will not happen every quarter, so the value captures will start to dominate the long run returns if we can continue to execute. Since many arise from special situations, I cannot predict how many opportunities there will be going forward if any, but I can promise that we will be watching for them.
In the coming days and weeks you can anticipate an upload of our quarterly analytics to the website along with extended commentary about strategy and performance. Additionally, we will be updating the company profile sheets with fresh analysis and data.
Commentary may contain forward looking statements which are by definition uncertain. We retain no obligation to update or correct forward looking statements should the available information change. Actual results may differ materially from our forecasts or estimations.