What are we looking for?
What the pros are buying.
You can get investment ideas by checking out a fund manager's top holdings. Given the preoccupation with income and higher-yielding securities in a low interest rate environment, let's look at Criterion REIT Income Fund at criterioninvestments.ca.
More about the fund
The $3-million real estate equity mutual fund has been managed by Lee Goldman and Chris Couprie of First Asset Investment Management Inc. since mid-2010.
Criterion REIT Income gained 19 per cent for the year ended Oct. 31 versus 2.3 per cent for the S&P/TSX Capped Real Estate Index. The managers focus mainly on Canadian REITs, and look for securities trading at a discount to net asset value (NAV).
The fund focuses mainly on Canadian REITs or companies in the retail, office and apartment sectors, and is steering away from the more economically sensitive hotel REITs, said Mr. Goldman, the lead manager.
What did we find?
InterRent, a small-capitalization apartment REIT, is a turnaround play that has risen more than 100 per cent this year.
But InterRent, which owns apartment buildings mainly in Ontario, still has profit potential and could increase distributions next year as cash flow increases, Mr. Goldman suggested. Its occupancy rate has risen sharply, while its margins are also improving. This REIT trades below the managers' estimated NAV of $3.50 a share, which is also their current "conservative" one-year target price.
Mr. Goldman also likes Killam Properties Inc., which rents apartment buildings and lots for mobile homes mainly in Atlantic Canada. "It's a very, very stable business," he said. "Occupancy is generally about 99 per cent. They have got about 20,000 units [including lots]."
A potential catalyst for this stock is a $25-billion federal contract granted recently to Halifax's Irving Shipbuilding Inc., which should help boost rents in the area because of the increased demand for lodging, he said.
Canadian Real Estate Investment Trust, which is "one of the most stable REITs in the Canadian landscape" and has a low payout ratio of 66 per cent, is also attractive, he said. This REIT is 58-per-cent focused on retail, with a further 21 per cent in each of the office and industrial sectors.
TOP HOLDINGS OF CRITERION REIT INCOME FUND TO OCT. 31, 2011
|Company||Symbol||Price $ (Nov. 28)||52 wk. high $||52 wk low $||YTD price chg. (%)||P/E Ratio||Yield (%)||Market cap. ($ mil.)|
|Northern Property REIT||NPR.UN-T||29.44||31.25||25.1||1.8||11.2||5.2||808.9|
|Primaris Retail REIT||PMZ.UN-T||20.1||21.78||18.27||2.87||20.3||6.1||1,655.1|
|Cdn. Real Estate Investment||REF.UN-T||35.9||36.3||30.32||15.62||18.2||4||2,417.1|
|TransGlobe Apartment REIT||TGA.UN-T||11.29||12.15||9.54||8.56||49.1||6.6||400.0|
|Chartwell Seniors Housing REIT||CSH.UN-T||8.12||9.37||6.45||-0.73||n/a||6.7||1,154.1|
|First Capital Realty||FCR-T||16.82||17.38||14.8||11.32||9.2||4.8||2,882.8|
|H&R Real Estate Invest. Trust||HR.UN-T||22.92||23.11||18.06||17.96||19.4||4.8||3,613.9|
|Killam Properties Inc.||KMP-T||10.62||11.59||9.32||1.63||14||5.5||798.0|
|Source: Globe Investor, Criterion|
© 2007 The Globe and Mail. All rights reserved.
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.