Derek Warren, assistant vice-president at Lincluden Investment Management

Focus: REITs
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MARKET OUTLOOK
REITs have pulled back from the summer highs. The first leg of the pullback was due to concerns of earnings growth in a Canadian economy that is improving at a sub-par rate. More recently, the Trump-bump and its effect on bond yields has magnified the sell-off. This is creating opportunities in many names, though risk-adverse investors may prefer to wait until the Fed starts hiking the overnight rate in December. Investors looking at buying now should focus on high quality companies trading at a discount, REITs with U.S. assets, and names that have been lowering their debt levels. This is a decent entry point but we are still on the cautious side until the bond market settles down.

TOP PICKS

GROWTH: FIRST CAPITAL REALTY (FCR.TO)
First Capital has a high quality portfolio with above average growth prospects. The stock recently sold off and is now offering a very attractive entry point for a high-quality name.

VALUE: SMART REIT (SRU_u.TO)
Smart REIT has a solid portfolio of Walmart-anchored retail properties, combined with a steady long term growth prospect in its Vaughn developments. Smart should offer above average earnings stability throughout the economic cycle.

INCOME: PURE INDUSTRIAL REIT (AAR_u.TO)
The industrial market has benefitted from the e-commerce trend and its effect on logistics and warehousing. Pure is the best way to play this trend in Canada, and offers an attractive six per cent yield. We would be accumulating on any weakness.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
 FCR N N Y
 SRU_u N N Y
 AAR_u N N Y


PAST PICKS: NOVEMBER 12, 2015

ALLIED PROPERTIES REIT +4.5% (AP_U.TO)
Allied is a great collection of some of the best located real estate in Toronto. Earnings have been disappointingly volatile and earnings growth is on the sidelines for some time. Still own it though we have trimmed post recent earnings call.

  • Then: $32.81
  • Now: $33.10
  • Return: +0.88%
  • TR: +5.27%

AMERICAN HOTEL INCOME PROPERTIES REIT +10.2% (HOT_U.TO)
This yield pick has performed just as it should, providing stable income focused returns as it grows its portfolio of U.S. hotels. A great way to play a stronger U.S. economy and protect against inflation. Still own it.

  • Then: $10.15
  • Now: $10.34
  • Return: +1.87%
  • TR: +10.64%

CanCanadian Apartment REIT +24% (CAR_U.TO)
Canada’s largest apartment REIT with an Ontario focus. A strong beneficiary from mortgage changes. Have taken some profits but still like this name. May announce expansion into a new global market. Still a big holding for us.

  • Then: $25.52
  • Now: $30.13
  • Return: +18.06%
  • TR: +23.09%

TOTAL RETURN AVERAGE: +13.00%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
 AP_u N N Y
 HOT_u N N Y
 CAR_u N N Y


FUND PROFILE: CIBC CANADIAN REAL ESTATE FUND

PERFORMANCE AS OF: NOVEMBER 15, 2016

  • 1 month: Fund -5.5%, Index* -5.1%
  • 1 year: Fund 5.8%, Index* 8.1%
  • 3 year: Fund 6.9%, Index* 5.0%

* Index: S&P/TSX Capped REIT Index
* Net of fees


TOP HOLDINGS AND WEIGHTINGS

  1. Canadian Apartment REIT: 8.5%
  2. Smart REIT: 7.8%
  3. RioCan REIT: 5.1%
  4. Pure Multi-Family REIT: 5.0%
  5. Brookfield Property Partners: 4.3%


TWITTER: @derekoenophile
WEBSITE: www.lincluden.com