Since the last time I wrote about them, Canadian REITs have come down much closer to their net asset value:
Here’s a quick overview of the sector breadth: 47% are above their 10 day moving average (MA), while 20% are above their 50 and 200 MA. Prices have on average bounced up quite a bit on the shorter term. But breadth is still quite oversold in the longer term.
The chart of the S&P/TSX Capped REIT Index is very similar to the $4 billion bellwether, RioCan. And as you can see, RioCan is in a Weinsteinian “Stage 3″. The 200 day moving average (blue line) has flattened out and is just starting to point down. As well, price has fallen under it and has formed successive lower highs and lower lows:
The only question is, will we see a repeat of April 2004? Back then, it also seemed like a “Stage 3″ topping formation but price quickly rebounded and broke out to the upside again. There is a possibility of that repeating because RioCan has strong support at the $20-19 range. And if the REIT index does head up again, it needs large constituents like RioCan to lead the charge.
Taking a look at some individual REITs in the sector, here are some that look interesting to me:
- IPC US Commercial REIT (IUR.un) is approaching multi-year lows and currently yields 9.2%
- Lakeview (LHR.un) is a tiny REIT with a high relative strength and a 13.1% yield
- Morguard (MRT.un) is the favourite of RBC analysts and has an 8.6% yield
- If you’re a bargain hunter, you might be tempted by Primaris (PMZ.un) but beware as it is in a clear downtrend and it only yields 7.5%
- Public Storage (PUB) is at long term support at $20 and yields 9%
- Retirement Residences REIT (RRR.un) might be making a double bottom at $7.25 and yields 11%
If you aren’t a bargain hunter and want to pick among the high relative strength REITs, take a look at Boardwalk (BEI.un), Dundee (D.un), Allied Properties (AP.un), Northern Property (NPR.un), CHIP REIT (HOT.un), and Canadian REIT (REF.un).
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