What a start to 2019
Given that January has had only 3 trading days it is far too early to call it a trend, but it’s a great start.
This past month you have probably gotten sick of hearing me whine about tax loss selling, but this first week of 2019 has gone a long way to demonstrate the point. With the rollover of the calendar, tax loss selling is out of the equation and some of the most beaten up REITs have come roaring back.
Recent economic data presents a somewhat Goldilocks environment in which the unexpectedly strong jobs number in December shows that the economy is still healthy, but there was enough weakness in the purchasing manufacturers index that the Fed may show restraint. Fed Chair Powell furthered this notion this morning as his commentary attenuated the market’s fears. Specifically, Powell showed much more willingness to slow down or even halt hikes and was even open to reigning in the balance sheet tightening.
The uptick in REITs has been in somewhat chaotic fashion with some rising far more than others. This should provide opportunity to sell the recovered names and reposition into those that remain cheap.
In the coming days we will be uploading our quarterly analytics for the year ended 12/31/18. We have been granted the opportunity to reposition into some extreme value and I think this will be evident in the numbers. The high carrying yield is fully supported with healthy dividend coverage. This suggests the big yields are not a result of aggressive dividend policy, but rather strong cashflows relative to market price.