My Own Analyst

Question on WSR

Question:

What do you opine of WSR at the current price of 13.48 after the stock dilution.  The only positive I see is that the cash is for useful expenditures.  Is it a buy at this low level?  They have sold about 2.1 million shares of the 4 million offering.  Is this a good or a bad sign?  As usual, someone must have leaked information on this because now I see why the stock has been so irrational lately.  I own the stock and I have getting ripped off by insider trading.  I follow STAG and their stock has fallen a little, but nothing like WSR.

 

The volume you see does NOT include the sales of the 4mm - that doesn't get printed on the exchanges.  I don't like WSR, as I have made clear.  With that said, probably a good buy for a trade...

WSR Question

I haven't spoken about WSR in a long time, but someone wants to know what I think of their earnings.  Let me first say that I don't really like this REIT any longer.  They have done a bunch of deals, some of which don't make sense, like kids in a candy shop.  The report was light from what I can tell.  With that said, I haven't been paying too much attention lately and can't really tell much from the press release.

Question on REITs

Carlos asks:

I have WSR.  Do you think that it went down because of the election results -- 
dividend related or bc they only reported EPS of $0.01 vs. $0.05 last time? STAG 
is still doing extremely well.   WSR seems like a safe, dividend paying (8.6%) stock, 
but then again, if dividend taxes go up, I may just be better off with tax-free munis.  
Worse case At 39.5% marginal rate, 8.6% = 5.2% net. 
Investors may drive the stock price down to get back to 2012 net dividend
 rate---that would signal selling it now.

WSR - I don't like it so much any longer, but no urgency to sell.  They did an acquistion that worries me a little.  I don't know why it dropped - my client owns it and, if I hear something informative on Monday at our meeting, I will convey it.

REITs are not eligible for the qualified dividend tax-rate to the best of my knowledge...

 

 

 

Income Idea: REIT yielding 8.9%

I have been following WSR for over a year as my client owns it.  They priced a secondary, and the stock is down consequently.  At 12.80, it yields 8.9%.  I like it below 13 and think it could trade to an 8% yield over the next six months...

Income Idea

STAG is a small triple-net lease REIT focused on single-tenant industrial properties in non-prime markets.  My client has been involved since it was 11, and they continue to deploy capital very effectively.  The stock is going to be down today after a public offering at 14.15 (8mm shares).  My guess is that it gets absorbed fairly well.  The yield is 7.3%, and they have room to keep hiking the dividend.

Heads Up on REIT Secondary

I don't think I have mentioned Mid American Realty (MAA) before, but this is a very conservative apartment REIT.  They tend to be in the SE and in smaller markets.  The main negative has been that they don't have much vacancy.  The good news is that pressure on rents should remain robust.

Today, the company announced the sale of 1.7mm shares, and the stock is down after-hours.  I think that these secondaries from REITs and MLPs tend to be good opportunities to get in.  Same with the BDCs - remember my HTGC call?

Here is a two-year (top) and one-year (bottom) chart of MAA and the REIT ETF (IYR) and SPY:

It's not surprising that in the big rally over the past two years MAA has lagged IYR a little - it's more conservative.  Still, note that the stock is down sharply from expensive levels last July.

The proceeds will be used to partially fund acquisitions, which are another growth avenue.  The offering could end up being 2mm, so it will add at most 6% to the share-count.

The dividend yield of MAA is 4.1% or so.  No one will get rich on this stock, but if you are looking for a conservative REIT, today''s announcement of the pending offering could give you a good entry on MAA.

ADBE Pops

ADBE reported their year-end results yesterday, and I caught the call.  It was a good quarter, but guidance was basically unchanged (not surprising - they had just shared it). The growth ahead is somewhat suppressed by a transition to subscription from up-front license as well as de-emphasis of certain products.  So, 4-6% growth (before a pending acquisition) is better than it looks for sales. 

I added the stock to my watchlist last week, having made several favorable comments over the past couple of months.  My target is 38 based on 14PE plus what I call "real" cash.  With the pending acquisition, my target may change slightly (less cash, more earnings - prob same multiple).  This stock is pretty high quality and kind of a sleeper.  As a reminder, I think the game changes with respect to the notion that AAPL killed them as HTML5 plays out. 

Not sure if anyone is involved - would stick with it to 29-30 for now, but we could get a chance to buy some over the next few quarters.  Ironically, if they are very successful with their subscription transition, it could hurt the stock in the short-term (lower reported sales and earnings) but make it more valuable (at least in my view because cashflows will be more stable under the higher subscription base).

Strong Close - Tomorrow's Action???

Here is my forecast for tomorrow:  Open lower, test 115.50-116.50, rally to 120-121, close 117-118.5

The chances of it playing out like I described are about zero, but my crystal ball has been clear the past two days (all things considered).

We will probably have some rebalancing to do w/CSCO tomorrow in both models.  I do feel, though, that my 25 target is pretty conservative.  I had reduced my earnings but kept the multiple at 13.5 (plus $3 cash).  So, it's still pretty attractive below 16.5 - just not so sure it should be so big...

I continue to have several other stocks I would like to see gone - there are too many other interesting ones, like EZPW and IRBT, for instance.

GTY Update

Some of you may remember GTY, the gas-station REIT with the large exposure to a single tenant.  The company today disclosed that its largest tenant didn't make a payment that was due (and isn't likely to make full payment).  Let's see what this looks like when the dust clears...

Income Ideas

I want to point everyone to a few REITs that one of my clients owns and that I follow:  GOV, ROIC and WSR.  None are widely followed.

GOV yields over 6% with a strong balance sheet.  They focus on purchasing properties that are then leased back to governments.  This is a relatively new stock, spun out of a larger organization. 

ROIC is a vehicle for a formerly successful REIT operator (Pan-Pacific founder Stuart Tanz).  We are expecting them to continue to deploy their capital and will likely see a highe dividend in the future.

WSR is based in Houston and focuses on B/C strip centers.  It's a dirty business, but they seem to be good at it.  Their focus is to cater to minority tenants.  This one has a juicy 8% dividend.

I don't have an income model yet, but these would all likely be included if I did...