Quote:
quote:Originally posted by k1w1
In looking at your portfolio's the thought that struck me was that you guys need to consider why you have such a low weighting into property stocks. Property will be the next mover as the stock market slowly goes off the boil. I detect a growing optimism in this sector.
I am not saying that you should necessarily buy them, but you should have an answer as to why you are weighted as you are...
From a fundamentals and valuation perspective real estate just doesn't light my fire. Although there is an improved degree of security in having a lease it is capital intensive, low yielding and cyclical. This means that a large amount of borrowing is needed to make a property play really profitable. I personally borrow very rarely for investment although will if the risk / reward ratio seems desirable. I don't like investing in companies with high borrowings either - they have a higher default risk and less flexibility to make those great, once in a cycle, company building acquisitions in times of distressed prices. While any cycle can be managed profitably I prefer to take mine with high ROA / ROE and low or no debt.