Idiosyncratic returns

2CHYP was designed to be fundamentally diversified such that it will not necessarily move with the REIT sector and the stocks within 2CHYP should move independently of each other.  From a theoretical standpoint, this should reduce the volatility of the portfolio as the chance of uncorrelated stocks moving in unison is somewhat low.  Theory is great, but is it actually working?

So far it seems to be.  In the quarterly analytics, we talked about the intra-portfolio idiosyncrasy where the portfolio was buoyed by strong performance of some names while a few crashed fairly hard.  This week gave us data on the uncorrelated nature of the portfolio relative to the REIT index.

REITs had a rough week, with the RMZ down about 1.3% in the week ended 10/20/17.  2CHYP, however, held strong with a slightly positive return for the week.  Although the portfolio is 100% REITs, our fundamental exposure is significantly different than the REIT index so we do not necessarily move with the index.  This week, our returns were dominated by UNIT CTT and JCAP which each moved on their own news.

Although it was overshadowed by the WIN announcement, I attribute much of UNIT’s move to the Crown Castle (CCI) report which revealed a strong fundamental backdrop for fiber regarding 5G deployment.  CatchMark’s acquisition continues to sink in and the market is viewing it favorably with the stock trading up most days of the week.  Finally, JCAP got initiated at ‘Buy’ by KeyBanc Capital with a $24 price target which seems to have brought new buying interest into the stock.

Up next, we are looking at potentially adding Government Properties Trust (GOV) into the portfolio as its price has dropped to a point that we find quite attractive.  With Brandywine no longer in 2CHYP, the office exposure could be a nice diversifier and it comes with a massive 9.4% yield.  It will depend on pricing of both GOV and the stock we might trim.

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.

2CHYP Portfolio Snap Shot

10/19/17 2CHYP Performance since inception

2CHYP Weekly Trade Confirmation Report – No Trades This Week