A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Oil has recovered almost all the losses from the OPEC fears. OPEC production will use up spare capacity shortly. Demand growth is not faltering. Energy stocks have sold out since the OPEC meetings that has not come back. Key message is that the amount of free cashflow these companies are generating, every day that oil trades above $70 is a good day. Be a bit more patient. Companies will start messaging about what they are going to do with their free cashflow.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Would look at tech, industrial and consumer discretionary in the near term. We can most likely expect a drift up in the next few months. Interest rate and inflation fears are going away. Unlock Premium - Try 5i Free
COMMENT
REITs are a hedge against inflation. He thinks inflation will persist and this bodes well for real estate. Rents can capture inflation, and so cashflows go higher. Valuations go higher as replacement costs are higher, so inflation is positive. Unique this time is we're going into an environment where inflation rates persist and rise, but we still have lower interest rates. Combination of the two could be a great tailwind for real estate.
COMMENT
Price of real estate assets. Private market dwarfs the public. His goal is to buy real estate cheaper than the stock market. You look at the valuations in the private market and compare them to the public. He sees a lot of value, especially in industrial, apartments, residential and even on the grocery anchor-shopping centre side. It's the right time to be looking at the sector.
COMMENT
Definition of FFO. Metric for earnings for real estate, whereas other publicly traded companies use EPS, earnings per share. The difference between cash coming in and cash going out. In real estate, they add back the depreciation expense to the earnings line to get more of a cashflow metric. It's important, as REITs pay out all their income as distributions, so they need that FFO to support the dividend.
COMMENT
Dividends for a RRIF in USD. VNQ is always a good option, with a yield of high 2%, gives broad diversification. You'd be better off doing what he does, which is to find the sectors that have tailwinds and go bottom-up to find discounts. You could buy one or both of these: WIR.UN (industrial) or HOM.UN (apartments), as both are USD denominated, listed on TSX, in sectors that he likes.
COMMENT
Positive factors for residential REITs. Immigration. Demand and supply. During the pandemic, so many in the age cohort between 20-30 moved back home or doubled up and moved away from urban centres. So this fall, you may have a doubling up of people looking for housing, so demand is very attractive. Rents for apartments being built today are at a much higher level, as they have to justify the high costs of development.
COMMENT
Increasing number of stocks assume growth trajectories that defy logic. Some of the large cap tech stocks are in this camp. Huge difference between a great company and the price it's trading at. For example, look at Shopify. Amazing Canadian success story, brilliant management, fantastic execution. One has to assume a spectacular growth rate for the next decade to justify the share price. No margin of safety if things don't work out perfectly. Utilities as well. Depend on central banks keeping interest rates where they are today, and relying on investors to keep on buying bonds at 2% or less. Consumer spending is starting to accelerate. Governments remain in spending mode. Suggests Fed will start tapering next year, and investors buying bonds are going to expect higher yields. This will put pressure on the pricier parts of the market.
'%20fill='%23ffffff'%3e%3cg%20id='Pager'%20transform='translate(423.000000,%201755.000000)'%3e%3cpath%20d='M243.295367,17.286474%20C243.68919,16.9045087%20244.327703,16.9045087%20244.721525,17.286474%20L249,21.4361302%20L253.278475,17.286474%20C253.672297,16.9045087%20254.31081,16.9045087%20254.704633,17.286474%20C255.098456,17.6684393%20255.098456,18.2877274%20254.704633,18.6696927%20L249.35654,23.856763%20C249.159628,24.0477457%20248.840372,24.0477457%20248.64346,23.856763%20L243.295367,18.6696927%20C242.901544,18.2877274%20242.901544,17.6684393%20243.295367,17.286474%20Z'%20id='Path'%20transform='translate(249.000000,%2020.500000)%20scale(-1,%201)%20rotate(-90.000000)%20translate(-249.000000,%20-20.500000)%20'%3e%3c/path%3e%3c/g%3e%3c/g%3e%3c/g%3e%3c/svg%3e)
'%20fill='%23ffffff'%3e%3cg%20id='Pager'%20transform='translate(423.000000,%201755.000000)'%3e%3cpath%20d='M243.295367,17.286474%20C243.68919,16.9045087%20244.327703,16.9045087%20244.721525,17.286474%20L249,21.4361302%20L253.278475,17.286474%20C253.672297,16.9045087%20254.31081,16.9045087%20254.704633,17.286474%20C255.098456,17.6684393%20255.098456,18.2877274%20254.704633,18.6696927%20L249.35654,23.856763%20C249.159628,24.0477457%20248.840372,24.0477457%20248.64346,23.856763%20L243.295367,18.6696927%20C242.901544,18.2877274%20242.901544,17.6684393%20243.295367,17.286474%20Z'%20id='Path'%20transform='translate(249.000000,%2020.500000)%20rotate(-90.000000)%20translate(-249.000000,%20-20.500000)%20'%3e%3c/path%3e%3c/g%3e%3c/g%3e%3c/g%3e%3c/svg%3e)
