Pushing Dirt

I’ve been touting REIT stocks as a group. I believe they are widely oversold. I’d steer well clear of any real estate service company stock such as CBRE, Jones Lang Lasalle, Grubb & Ellis. These companies are dependent on commission revenue to survive, and the volume of sales was down 80% last year on the commercial side, with not much improvement on the horizon for 2009. Wall Street analysts love the reliable income these firms’ property management arms generate, but the profit margin on property management is tiny.

Grubb and Ellis is sadly my pick for most likely to collapse in the next 12 months. There’s lots of internal strife at this company and with the stock down to 80 cents a share things are looking bleak.

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I touted First Potomac Realty Trust yesterday (NYSE:FPO). If you bought bought FPO yesterday you made about 7% in one day and locked in a yield just shy of 9%. What a roller coaster today!

REIT stocks have been hammered of late, some deservedly so. One worth a look is First Potomac Realty Trust (NYSE:FPO). It’s a nice play on one of the strongest commercial real estate markets in the country, ie Washington DC. I’ve sold buildings to them and I am impressed with the principals. The commercial real estate market as a whole is WAY oversold. Things may have slowed down but around here at least market fundamentals are sound. FPO’s dividend has grown nicely and the yield is through the roof right now thanks to the punishment the market has given the stock.