-Jan-
06
Real Estate Operations ($REOPER) Caution - Alexandria Real Estate Equities (NYSE: ARE)
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The Real Estate Operations ($REOPER) sector looks to be reaching a tipping point. A steady flow of institutional money continues to leave the sector as it has for the past couple weeks now. After the sector has seen a strong run, the time to take profits is now should you be holding stocks within this sector. Even companies with terrible fundamentals such as National Retail Properties (NYSE: NNN), EastGroup Properties (NYSE: EGP), and Equity Residential (NYSE: EQR) have seen tremendous run ups over the last couple months. It is now only a matter of time before these stocks and the real estate market in general correct itself. I believe that when a correction in the overall markets takes place, Real Estate Operations will be the sector that leads the markets lower.
Many of the stocks in the sector continue to see lower highs now and even lower lows. Alexandria Real Estate Equities (NYSE: ARE) is a good example of that. Head and shoulder patterns begin to emerge and so do many short opportunities within the sector. I have also seen increased insider selling over the last month within the sector. I normally do not put too much weight on insider selling, but within the real estate sector those at the top are good at knowing when the markets are changing (and that time is now).
I caution those investors who are overly bullish because of the markets recent record breaking run and suggest they be ready with a bearish strategy should the market decide to correct soon. Best of luck in 2007 friends.
CMO. A mortgage-backed, investment-grade bond that separates mortgage pools into different maturity classes. Collateralized mortgage obligations (CMO) are backed by mortgage-backed securities with a fixed maturity. They can eliminate the risks associated with prepayment because each security is divided into maturity classes that are paid off in order. As a result, they yield less than other mortgage-backed securities. The maturity classes are called tranches, and they are differentiated by the type of return. A given tranch may receive interest, principal, or a combination of the two, and may include more complex stipulations. One negative aspect of collateralized mortgage obligations is the lower interest rates that compensate for the reduction in prepayment risk and increased predictability of payments. Also, collateralized mortgage obligations can be quite illiquid, which can increase the cost of buying and selling them.
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Kate
Jan. 8, 2007
Great article and thanks for the advice, Chad! This type of warning is appreciated and speaks to the fact that as investors we need to be aware of not only today's market occurences, but also use the past to help predict what the market may do in the future.
johnnywatt
Mar. 9, 2007
This Article is very Nice. Good information has given in this article.