REIT and Utility Smackdown Continues
By: Tim McPartland,
The smackdown in the REITs and Utilities continues–in a savage manner today as average issues fell 1.5 to 2%. The REITs have been weak as hell for months now and the movement in share prices is strikening similar to the way the MLP massacre occurred last year. REITs tumble hard on big down days and barely respond to the upside on up days. The utilities act in a similar manner, but buyers do come in harder after a fall—apparently thinking they are picking a low.
We have written a number of times that we believe sector selection is more important that the individual issue selection—when REITs take a big tumble, they all tumble. Let’s face it–when investors abandon a sector they just do it–forget that individual issues are solid companies. NO ONE CARES about the positive fundamental case–the good goes out with the bad.
Here is the plan for us. We may lighten up by 1 REIT issue tomorrow. Additionally, we may sell utility-Southern Company (ticker:SO). We are looking to add to our new MLP position in NGL Energy (ticker:NGL). NGL is up 3% since we moved into it last week and it is acting nice and strong. We wrote about NGL here last week.
We end April with a 2015 Blended Income Portfolio gain of 3.84% YTD (although we were up a full percentage point higher earlier in the week). This is a super nice gain for April of 1.44%–we can’t ask for more. These gains roughly equal our personal gains as we are positioned very similar to the 2015 Blended Income Portfolio.
We shall see now if interest rates start drifting lower tomorrow. The economy remains weak and we think the market believes that there is no rate increase in sight until at least fall. Going into the last FOMC meeting rates went higher and then drifted down–we shall see if it happens again.
Be very cautious with this market–having cash is OK in here as the danger of a black swan of some sort is as high as it has been for a long time.