Despite the muddying of legal matters that threaten to add risk-premium costs to future mortgages, the industry’s massive shakeup has created opportunities for investors.
The combination of perpetually low interest rates, and a flood of displaced property owners, has made real estate investment trusts (REITs) a popular choice for investors searching for both income and share price appreciation.
I’ll talk more about REITs next week, but for today, let me share some updates on a healthcare REIT I’ve recommended in both Boom & Bust and Survive & Prosper – Omega Healthcare Investors (NYSE: OHI).
REITs are quite sensitive to interest rates, since rising rates squeeze the profit margins of these operations. That’s why, as Treasury yields spiked at the beginning of May, OHI dropped more than 20% over the following month.
On June 4, I said buying OHI between $30 and $33 – the Fibonacci buy zone – was a good bet. This gave investors who missed out on my original recommendation, a chance to join the trend.
Then, on June 21, I sent out further instructions on how to manage risk by setting a stop loss order between $27.50 and $28/share.
Here’s the latest…
OHI traded through my recommended buy zone, giving investors the chance to grab shares for as little as $30. And, shares never traded low enough to hit our stop loss “eject button” level.
Now, OHI is up more than 16% in 16 days… and trading above the upper limit of the $30 to $33 buy zone.
Bernanke’s comments, since he spooked the market in May, have been well-received by the market. This means the short-term spike in interest rates should subside… easing the temporary headwind that sent most REITs lower through June.
This was a golden opportunity to buy a great REIT… at a great price. I hope you had the chance to jump on this trend! If you did, stay the course. I’ll let you know when the time comes to get out.