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Michael Missaghie, Portfolio Manager, Sentry Investments
FOCUS: REITs
Market Outlook:
The equity markets have had a strong start to the year on the back of improved economic indicators out of the United States and global central bank easing. Going forward, the most likely scenario continues to be that of moderate economic growth and continued low interest rates driven by stubbornly high unemployment in the U.S. and continued European austerity measures. This should prove to be a positive environment for high quality businesses that generate above average free cash flow and dividend growth.
TOP PICKS:
Boardwalk REIT (BEI TSX) (Average cost base is $50.26)
Multi-residential REIT with the majority of its properties located in Alberta, Quebec, Ontario and Saskatchewan. Trades at a discount to net asset value and should offer attractive free cash flow growth and distribution growth over the next 12 months. Yield is 3.15 percent with a consistent history of distribution increases and a low distribution payout ratio of 70 percent.
Artis REIT (AX.UN TSX) (Average cost base is $12.44)
Diversified (office, industrial, retail) REIT with 20 percent of its assets in the United States. Management has done a good job of lowering the distribution payout ratio and purchasing assets in the United States that have increased in value over the last two years. Trades at a discount to net asset value and offers a 6.7 percent yield.
AvalonBay Communities Inc. (AVB NYSE) (Average cost base is $130.00)
High quality U.S. Multi-residential REIT with the majority of its apartments located in the coastal markets of the United States. Trading at a discount to net asset value while offering strong free cash flow growth from its in-place portfolio and developments. Overhang from their partial purchase of the Archstone portfolio should be removed over the next 3 months.
| Disclosure: | Personal | Family | Portfolio/Fund |
| BEI.UN | N | N | Y |
| ACB | N | N | Y |
| AVB | N | N | Y |
PAST PICKS: January 10, 2013
NOTE: Missaghie likes to hold stocks for longer periods of time than a couple months, so the returns don’t necessarily reflect his investment style
H&R REIT (HR.UN TSX)
| Then: $23.98 | Now: $23.35 | -2.63% | TR: -0.98% |
CAP REIT (CAR.UN TSX)
| Then: $24.87 | Now: $24.60 | -1.11% | TR: +0.02% |
American Campus Communities (ACC NYSE)
| Then: $46.94 | Now: $45.75 | -2.47% | TR: -1.77% |
Total Average Return: -0.91%
| Disclosure: | Personal | Family | Portfolio/Fund |
| HR.UN | N | N | Y |
| CAR.UN | N | N | Y |
| ACC | N |