Balancing AIMS AMP Capital Industrial REIT and Sabana REIT.

I have been kept busy the last couple of days. By the time I took a shower and called it a day, it was technically night since it was already past 11pm. It is the same thing today. Hopefully, I will be more settled in another week or so. Till then, I can only hope to blog more regularly.

So, what have I been doing in the stock market?

I increased my investment in Sabana REIT while reducing my investment in AIMS AMP Capital Industrial REIT. Having these REITs in equal weightage in my portfolio is an aim of mine. This is something I said I would be doing in an earlier blog post too. If you missed it, read it here. That was just last month.

At that time, AIMS AMP Capital Industrial REIT was trading at 20.5c/unit while Sabana REIT was trading at 91c/unit. Today, they are trading at 22c/unit and 93c/unit respectively. In the last few weeks which saw a bloodbath in the stock market, they have appreciated in price. How's that for resilience and, dare I say, capital gains?

More importantly, it has made the reason to balance my investments in the two REITs more compelling. A gain of 1c from 20.5c to 21.5c is a gain of 4.88%. A gain of 1.5c from 91c to 92.5 is a lesser gain of 1.65%. So, partially divesting AIMS AMP Capital Industrial REIT and buying more units of Sabana REIT makes even more sense now (i.e. sell the former at 21.5c and buy the latter at 92.5c).

The DPU of AIMS AMP Capital Industrial REIT is 2c. With unit price increasing from 20.5c to 21.5c, it means distribution yield decreasing from 9.76% to 9.3%.

The DPU of Sabana REIT is 8.81c. With unit price increasing from 91c to 92.5c, it means distribution yield just decreasing from 9.68% to 9.52%.

See how the distribution yield of Sabana REIT is now higher than that of AIMS AMP Capital Industrial REIT when just a few weeks ago it was lower? This is attractive to me as Sabana REIT's numbers are stronger and more of its properties are of better quality too. You can also say that the lower distribution yield of AIMS AMP Capital Industrial REIT tipped the scales even more in favour of Sabana REIT now.

I have been putting sell orders at 22c for AIMS AMP Capital Industrial REIT but they were, unfortunately, not filled. At 22c, its distribution yield would be 9.09% and even if I were to buy units in Sabana REIT at 93c, the distribution yield would be a more attractive 9.47%.

Finally, if you are wondering how I managed to buy any Sabana REIT units at 92.5c today when it traded at 93c, I didn't buy any today. I bought yesterday and the day before.

The long awaited technical rebound.

I keep saying that downtrends are rivers of hope and that prices do not go down in a straight line. This is quite natural but in despair and desperation, it is all too easy to give up and throw in the towel. This is capitulation.

Capitaland and CapitaMalls Asia are both in downtrends. This is quite obvious. With no signs of reversals to the upside, I recently added to my long positions with the simple believe that they are very oversold and technical indicators were prime for a technical rebound.

Of course, there was no way to know if or when the technical rebound was going to take place. However, the feeling was that any further downside could be limited in case a rebound did not take place anyway.

Now that the rebound has happened, it is important not to become delusional to think that prices could continue going up to hit the old highs. With the downtrend intact, the thing to do is to sell if resistance levels are tested. The question is at what price levels do we sell at? Well, my way is to search out the resistance levels and I see $2.91 and $2.94 for Capitaland.

Wait a minute, do I not think the share price could go higher to test resistance provided by the trendline which is approximating $3.20? Well, it could, of course, but that is a long shot and, bearing in mind that I added to my long position recognising the strong downtrend the counter is in, the thing to do is to lock in gains and to reduce exposure.

What about CapitaMalls Asia? Well, I am still hopeful that its share price could do a gap cover at $1.55. However, I also recognise that we could find resistance at $1.50 to be quite significant.

Therefore, locking in gains at $1.50 would be a good idea if it were to be tested. Let's see how things turn out tomorrow.

Related posts:
Capitaland: Average buy price of $2.81.
CapitaMalls Asia: Bought at $1.37.

STI rises 1.3% to 3,053.51 at closing
Tuesday, 21 June 2011

© 2011 - The Edge Singapore

CapitaLand to double portfolio in China in 5 years, Lim says: Update
Tuesday, 21 June 2011

© 2011 - The Edge Singapore