Take Charge... A Blue Chip To Buy

In 2008, Retail Opportunity Investments Corporation (ROIC) raised equity through a special purpose acquisition company (or SPAC), in essence, a blind pool with $400 million of cash at the trough of the real estate market.

Summary

  • I believe that a long-term strategy is the best way to build and preserve financial security.
  • I can’t say this enough, “quality wins the race".
  • ROIC is exposed to retail risk, but the properties are extremely insulated due to the strong barrier to entry attributes.

In the upcoming edition of the Forbes Real Estate Investor, I decided to focus on “the most beaten buys” – the top REITs that have seen their shares whacked the hardest year-to-date. Obviously, the retail REITs have been hammered hard because of the continued “Amazon effect”, and for value investors, this has created a wider margin of safety.

Over the last few months, I have continued to preach the mantra that “quality matters” because that translates into greater earnings and dividend growth. While I do have a few “speculative buys” in the “high alpha” portfolio, I am not recommending stocks just because of their higher yield – simply because I believe they are too risky and won’t deliver the performance to reach my investment objectives.

Simply put, I believe that a long-term strategy is the best way to build a preserve financial security.

To assist with filtering out the best quality REITs, I devised a scoring system in which I systematically analyze a company based on a variety of metrics. In the upcoming newsletter, I include scores for all the REITs in my REIT Lab and then I compare these scores with the target BUY prices.

In my newsletter, I refer to the scoring tool as the Rhino Rating Model because it is essentially designed to filter out the most defensive REITs. A high Rhino Score means that the company is battle-tested and should withstand threats better than the peers.

Whenever I spot a REIT with a high Rhino Rating and an attractive valuation, I remind myself that it’s time to “take charge”. To echo that sentiment from a fellow Forbes writer, Paul Johnson, in an article he penned over ten years ago:

“That is what the rhinoceros does. It may not be a model animal in most ways. But it does one thing very well. And that one thing we can learn: Charge!”

Battle-Tested?

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