Professor’s Comments – It was the REITs

Posted by professor  at January 14th, 2014

While I was watching the football game last night, I was doing some research, trying to use The Professor algorithm to see if it would be useful in identifying trends in specific sectors.

I started with the precious metals, but this was a poor choice because the trend has been down for the past year, and there weren’t enough positive opportunities to draw any conclusions.
So I created a database that consisted of several sector ETFs. Most of these sector ETFs were not in the database for the Dean’s List or the Member’s Watch List. However several were. And because of this, when I ran The Professor, one sector in particular caught my eye.

It was the REITs.

If you look closely at the Dean’s List, you will see three Real Estate Investment Trusts (REITs) on the List about mid-pack. These include VNQ, VNO, and RWR.

In my WSR, I talked about how Friday’s terrible jobs report would likely keep interest rates low for the foreseeable future. I also talked about a few sectors that should do well in this environment, including home builders, utilities and bonds.

But I left out an obvious choice…the REITs.

If I’m right about low interest in the months ahead, investors will start to look for places to put their money to work where it will earn higher yields. So REITs, utilities, and high dividend paying stocks should do well.

On Friday, after seeing Emeritus highlighted El Paso Electric (EE) for the Honor Roll., I looked at the Dean’s List and noticed that XLU, the Utility ETF, was there too. Hmmm.

Just about all of the stocks and ETFs mentioned above have nice patterns, either a HS or a TLB, with really tight Bollinger Bands. So a small pop this week could put them into the trend mode.
Taken together, it tells me that attitudes on The Street could be changing as investors become more conservative and start to look for higher yields.

Watch the dividend payers.
That’s what I’m doing,
h

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