October 12th, 2009

REITs and Energy: New Darlings

I have to travel again this week so my posts might be sparse. In the meanwhile, though, I recommend you take a look at a group that appears to be in the last stages of completing very distinct bottom reversal patterns: REITs.

Remember the “perpetual in-the-money call option” strategy of last November and February? It might be appropriate for resurrecting it and applying it to REITs. For example, here are some low-priced, high-volatility REITs; construct for yourself a basket (to spread the risk, a small, equal amount invested in each of 4 or 5) and there’s a good chance you might make a nice return even if one or two go further down in price:

  • MPG
  • AHR
  • BEE
  • SFI
  • GKK
  • CT
  • CBL
  • PEI
  • DDR
  • ABR
  • FR
  • LXP

These currently all sell for less than $10 and many still pay nice dividends.

As money on the sidelines continues to try find stocks that haven’t already been propelled to what many consider unsustainable prices, they may also begin pushing up the oil and gas, solar and various alternative energy stocks like coal and uranium. Here, too, clear bottom reversals have been formed and stocks are about to break, or have broken, out (see “Mysterious Happenings in the Oil Patch” and “SOLR: A Winner When Clean and Alternative Energy Heats Up“). Whether its part of the weak-dollar trade along with precious metals, energy stocks of all sorts (including the oil service stocks) are starting to heat up again.

Even as the market edges closer to a consolidation, a much needed midstream pause, there are still stocks that could have room to grow.

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