Thursday, November 19, 2015

Buying early during a pullback not always bad

My recent purchase of Dream Office REIT has now descended into the red. Will the stock price continue to deflate? I would not be surprised. CIBC is rating the stock under perform and has set a target of $18.

There is a lot of worry concerning the REIT's Calgary and Edmonton rental space which makes up a a nice chunk of the REIT's holdings. I'm not sure of the exact percentage but I understand that 25 precent or more is held in the Western province whose economy has been crippled by the falling price of oil.

Desjardins and TD Securities are still rating D.UN a buy and at least one analyst has set a target price of $27. But even in that case the analyst's target has seen some large reductions in recent months. Should I have jumped ship and sold. Clearly, yes. I'd have more options today if I'd have followed that course. That said I need income and even with a possible cut in the dividend I will enjoy a nice, steady income flow form Dream Office.

This not the first time that I have bought a stock in mid-descent. A lot of my bank stock was not bought at the absolute bottom of the2008-2009 crash. I invested in XRE well before it bottomed during that same crash. I bought both XIC and XMD in mid fall. The thing is the market goes up and down. If you haven't paid way too much, if you bought at a discount but a smaller one than the eventual fire sale price, you will do just fine.

And you will enjoy a nice income while waiting for the recovery.

One last note: Earlier this year I started investing the monthly D.UN dividend in the TD U.S. Index Fund-e (TDB902). Fully 7.5 percent of  our one TFSA is now invested in TDB902. It has enjoyed almost a five percent gain since we started acquiring the units.

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