Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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| ETF
Spotlight -- iShares Dow Jones U.S. Real Estate Index Fund (IYR) |
Published: June 7, 2004
The iShares Dow Jones U.S. Real Estate Index Fund
(IYR) is an exchange-traded fund (ETF) that invests wholly in real
estate investment trusts (REITs). REITs are companies that invest in
either property or mortgages. Essentially, they provide investors with
liquid ways to invest in the real estate market. REITs typically pay
high dividends, which they fund from rents or mortgages. Some REITs hold
both mortgages and actual property.
The value of an equity REIT--a REIT that invests in property rather than
in mortgages--is based on the underlying value of the firm's property
portfolio as well as the rental income it receives from that portfolio.
Many REITs invest in things like shopping malls or hotels. These
properties are highly correlated to the economy, as leisure and shopping
prices tend to fluctuate along with our nation's economic health.
Mortgage-based REITs will also move along with the economy because the
ability of the owners to service their mortgage payments will depend on
the economic viability of the project. More important though is the
direction of interest rates, which has a direct impact on the value of
these fund. Higher interest rates lead to lower prices--just like any
bond.
The iShares Real Estate Fund (IYR) invests primarily in equity REITs.
Because of this, the fund isn't as closely tied to interest rates. This
is borne out by the fund's correlation to the iShares 20+ Year U.S.
Government Bond Fund (TLT), which is under 15%. However, recent price
action has seen a tighter correlation, as higher rates have started to
slow real estate gains in 2004.
| iShares
Dow Jones U.S. Real Estate |
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| Type: |
Sector Fund |
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| Similar funds: |
20+
Year Lehman Government Bond Fund (TLT) |
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Utility
SPDR (XLU) |
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| Options?: |
Yes, Illiquid |
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| Performance
Data |
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| 52-week High: |
$110.90 |
4/2/2004 |
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Annualized
return since: |
| 52-week Low: |
$82.86 |
6/23/2003 |
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One-year |
21.69% |
| YTD Return: |
1.62% |
(as of 5/21/2004) |
Three-year |
13.02% |
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Five-year |
N/A |
| Dividends: |
$5.35 |
past 12-mos |
Life of fund* |
13.97% |
| Expense Ratio: |
0.60% |
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*
- Started trading 6/19/2000 |
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| Correlation
Data* |
(1/02/02-5/28/04) |
Holdings* |
(as of 6/1/2004) |
| Dow
Jones Industrials |
48.3% |
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Equity
Office Prop (EOP) |
5.40% |
| S&P 500 |
|
50.5% |
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Simon
Property (SPG) |
4.60% |
| Nasdaq
Composite |
43.6% |
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Equity
Res. Prop (EQR) |
4.13% |
| Nasdaq-100 |
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38.6% |
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Genl.
Growth Prop (GGP) |
3.28% |
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Plum
Creek Timber (PCL) |
2.98% |
| TLT
(since 7/26/2002) |
14.7% |
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ProLogis (PLD) |
2.80% |
| XLU |
|
42.5% |
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Vornado
Realty (VNO) |
2.79% |
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Archstone
Smith (ASN) |
2.70% |
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Boston
Property (BXP) |
2.64% |
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Duke Realty (DRE) |
2.13% |
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Percent top ten are of total |
33.45% |
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| Average
Daily Volume |
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Average
Daily Price Range |
| Apr-04 |
513,940 |
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Apr-04 |
2.2% |
| 2004 YTD |
289,004 |
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2004 YTD |
1.6% |
| 2003 |
51,541 |
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2003 |
1.1% |
| *
- Correlation measures how closely the two items track each
other |
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*
Includes prior day's close (true range) |
HOW TO MAKE MONEY IN IYR THIS
YEAR
Anybody who assumes that REIT-based indices are totally safe obviously
never went through something like April 2004. During that one month
alone IYR tumbled about -20%. It has since recovered more than half its
losses. However, with interest rates still likely to continue higher
over the next year, to be followed by a slower economy in the latter
part of 2005, IYR is unlikely to exceed the $110.90 high it set in early
April anytime soon.
Will the fund collapse? That is not all that likely
either, as the market has already priced in the impact of an large
number of future interest rate hikes. In addition, the fund's
approximate +5% dividend certainly will smooth things for those willing
to hold this fund over the long haul.
If I were to make a recommendation solely on the price chart, then I
would suggest shorting the fund with stop losses near $105. However, due
to the very high dividend payout, short sales in this fund are
problematic. Why? Well, when you short a fund with a fat dividend like
this, you'll need to pay out all dividends to those who lend you the
shares. If I thought IYR was due for another -20% drop, I would suggest
such sales. However, that now appears unlikely. Therefore, the best
thing to do with IYR now is stand aside and only look to buy the fund
near its May 2004 low of $87.50.
This fund is an excellent defensive play, and if and when the economy
starts to ease, as long as the REITs it holds remain solvent, the index
should outperform the stock market overall. In addition, the fund will
pay you a considerable amount of income while you wait for economic
conditions to improve.
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