Disparate movements

REITs are now moving up and down individually rather than as a clump.  We find this to be an encouraging sign as it can open up trading opportunities.  Along these lines, Hersha has separated itself from the pack with a huge outperformance in recent weeks and months.

While we like its fundamentals, the price increase is making it a potential candidate to free up some capital.  We are currently looking at 2 stocks as replacement positions.

  • Simon Properties
  • Outfront Media

Both have dropped considerably since we last owned them in 2CHYP affording a favorable re-entry point.

With just WPG and a tiny bit of KRG in the portfolio, we are substantially underweight retail.  SPG would make a nice addition as it would round out the exposure by balancing the Class B malls with Class A.  Outfront’s price chart is enticing with a sharp drop-off that was unrelated to fundamentals.

We are not ready to pull the trigger just yet as Hersha may have some more room to run in the near term.  Pebblebrook recently leaked its 1Q18 earnings with a sizable beat and that has sent hotel REITs up a good bit.  Hersha’s properties are in many overlapping submarkets with PEB’s so I would anticipate a strong 1Q18 from HT.

We will continue to monitor the pricing and valuation gap between current portfolio holdings and potential replacement stocks.  A variety of positions are on the cusp of having superior risk adjusted returns so stay tuned for our trading activity.

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

4/12/18 2CHYP Performance since inception

2CHYP Weekly Trade Confirmation Report:  No trades this week.