Full Steam Ahead For iShares REITs ETF

by: Thomas Smicklas February 04, 2008 | about stocks: REM    

Thomas Smicklas

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Those that have had occasion to peruse my bio know that I have had many years of experience in real estate. Do not let your heart be troubled by the daily pounding of the press about how terrible the current prospects for real estate are. It is bad - for the greedy and naive. It is a great time to invest if you have cash and choose your real estate investments wisely.

While I prefer the actual purchase of rental real estate, I have come to the conclusion that for investors not wanting the pressure of a people business, in spite of the tax and income benefits derived from owning property, the mortgage business is getting life support from the Fed and the politicians and is now a superb avenue to invest monies for excellent yield and capital gains. Don't be late to this party.

One vehicle to participate in the mortgage company resurgence is iShares' FTSE NAREIT Mortgage REITs Index Fund (REM). Since its inception in May of 2007, the fund is down almost 35%. Trading at $31.85 with an average volume of 13,225 shares and a market cap of $20.7m, the fund has a current quarterly yield of 8.9%.

REM contains a basket of twenty-six companies. Annaly Capital is almost 27% of the portfolio, which is fine with me. Other holdings between 3-8% include Thornburg Mortgage, MFA Mortgage Investments, Redwood Trust, Gramercy Capital Corp., Capstead Mortgage Corp., Northstar Realty Finance Corp., Newcastle Investment Corp., Capital Trust Cl A, Anthracite Capital, Rait Investment Trust and Anworth Mortgage Asset Corp.

I prefer this mortgage REIT to REITs that own apartment and mall complexes. Large REITs are too cumbersome to make the quick moves that investor pools and individuals can initiate to snap up great properties on the cheap. I liken REITs in the apartment and mall catagories to battleships trying to turn in a canal. REM includes companies that, by the very nature of their business, have to move fast, creatively and with hard marketing to succeed. Not so with other types of REITs. Full steam ahead for this ETF.

With a high yield that is sustainable, a potential 25% upward move over the next six months and the low .48% expense ratio, REM is a great choice for investors willing to place a bet that the bottom has been touched in this area of real estate.

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This article has 2 comments:

  •  
    Feb 04 07:02 PM
    Just reset my 401k contributions to equities, agg equities, and my reit.
    If it ain't time, then it's damn near it. And really, that's good enough.
    Reply | Link to Comment
  •  
    Feb 04 07:11 PM
    My sentiments, exactly. I bought REM after researching REIT ETFs this weekend, before your article. I hope we are right.
    Reply | Link to Comment
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