Trader’s Narrative

It’s been a while since I mentioned Canadian REITs so here’s a quick recap of what is going on in this sector of the Canadian markets. Eventhough this is a trading blog, I look at income investing once in a while because I think its smart to sweep your trading earnings into relatively safe investments which can earn you tax-advantaged passive income. And no current investment is more suited for that than REITs.

There have been a number of new developments. A slew of new REITs have come into the market: Temple, Scott’s, InterRent, BTB REIT and Westfield has continued to grow and been renamed Artis. Also Homburg bought Alexis Nihon last year. Retirement Residences and Summit were taken private and Legacy has put itself up for sale. Taking these into account, I’ve updated the list of Canadian REITs at the bottom of this post.

The last time I provided an overview of Canadian REITs, I mentioned that eventhough things looked bleak (with higher lows and lower lows) there was good reason to believe that would shake out weak hands and be followed by another upleg. I based this on the breadth numbers within the sector and also by looking at the bellwether component of the index, RioCan, which was near or at support.

Here’s what happened:

The green arrow is when I last posted. By the way, the spike down you see in November 2006 isn’t a bad tick - it was provoked by an about face by the federal government. Canadian REIT investors were reminded that no one lies better than a politician.

This chart illustrates what I was saying before about the Mexican market. Eventhough a well defined trend can be in effect, you have to enter intelligently. Otherwise you end up frustrated and watching from the sidelines once your stop loss is triggered. Everytime the REIT index has dipped below the 200 day moving average, it has been an excellent buying opportunity (for long term investors).

Breadth wise, the public real estate investment trust market is not that different from where it was the last time I looked at it: 39% above their short term 10 day moving average, 27% above their medium term 50 day moving average and finally 79% above their 200 day moving average. The high percentage above their long term MA gives me pause but it isn’t that uncommon in a strongly trending market. I think if you’re a long term holder, just sit tight. And if you’re on the sideline, wait for further pullback.

Here is the new list of Canadian REITs:

Allied Properties (AP.un)
Artis REIT (AX.un) - previously Westfield
BTB REIT (BTB.un)
Boardwalk (BEI.un)

Calloway (CWT.un)
Canadian Apartment Properties (CAR.un)
Canadian Hotel Income Properties (HOT.un)
Canadian REIT (REF.un)
Chartwell Seniors Housing (CSH.un)
Cominar (CUF.un)
Crombie (CRR.un)

Dundee (D.un)
Extendicare (EXE.un)
H&R REIT (HR.un)
Holloway Lodging (HLR.un)
Huntingdon (HNT.un)

IPC US (IUR.un)
InnVest (INN.un)
InterRent (IIP.un)

Lakeview (LHR.un)
Lanesborough (LRT.un)
Legacy Hotel (LGY.un)

Morguard (MRT.un)
Northern (NPR.un)
Primaris (PMZ.un)
Public Storage (PUB)

Retrocom (RMM.un)
RioCan (REI.un)
Royal Host (RYL.un)
Scott’s REIT (SRQ.un)
Sunrize (SZR.un)
Temple REIT (TR.un)
Whiterock (WRK.un)