Dow Jones Industrial Average 12217.56 (Down) Week ending 12-30-2011 - End of Year
Dow Jones Industrial Average 12359.92 (UP) Week ending 01-06-2012
The
Black Swan Theory or
theory of black swan events is a metaphor that encapsulates the concept that "
The event" is a surprise (to the observer) and has a
major impact. After the fact, the event is rationalized by hindsight.
The theory was developed by
Nassim Nicholas Taleb to explain:
1.The disproportionate role of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology
2.The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)
3.The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs
(
Source Wikepedia)
The
largest black swan economic event of the last 5 years was certainly
the collapse of the Mortgage Backed Securities market worldwide and the
downturn in values in the US real estate market.
Trillions of dollars in investor equity being loss. My thinking now is
that the Real Estate market has over corrected. This will create at some point a boomerang effect and possibly a
"Black Swan" event going rapidly in the other direction to return to the mean.
So I am looking this week at some of the
Real Estate Investment Trust (REIT'S) that you may be able to take advantage of this bounce back in prices. I am not drifting to far a field from some familiar names because they are the entities with the largest capital and purchasing capabilities to take advantage of this turn when it happens.
EQUITY RESIDENTIAL (Symbol EQR, $55.69) of Chicago , IL. the developer of apartment properties would be the first one to look at.
EQR operates at a Net profit margin of
52.20% , not to shabby. It has a
4.08% dividend yield and the stock has profited from people not being able to afford houses and moving into apartments instead.
EQR has produced a
3 year return
on the stock price of
152. 3%. 
Simon Property Group Inc. (Symbol SPG, $126.82 ) would be the next
REIT to look at. It has been extremely profitable and very successful even without a black swan event. Lets say to the tune of a
3 year return of 215.2%.
SL Green Realty Corp. (Symbol SLG, $69.78) are the
"Kings of New York City" real estate guys and gals. Own
SLG and you can be like
Donald Trump, a real estate magnate.
Net Profit margins for the company are
54.90% and the
3 year Total return on the stock is
354.5% . Think about a
Black Swan event happening and them really doing good! Throw in
5 year sales growth of 14.68 %.
You probably drive by one of these on your way to work everyday and never notice it,
PUBLIC STORAGE (Symbol PSA, $132.28) . You have to empty out a bunch of houses and the stuff has to go somewhere. People are hoarders, they never throw anything away due to the fear of lost value.
5 year earnings growth here at
Public Storage is
40.49%. Net profit margins run
45.2%. ( By the way
credit all these stats the fine work of the people at Smartmoney.com , great job by them).
Total 3 year return of
128.2%. So somebody has been making money in the real estate downturn.
Of course you cannot have real estate without mortgages. (unless you happen to be really rich). With
Fannie Mae and
Freddie Mac
sorting out their current quagmire, the logical place to look for investment in this area is
Annaly Capital Management Inc. (Symbol NLY, $16.06). 49.10% Net Profit Margins here at
NLY. 5 year sales growth of 14.76%. This one has a
14.20% dividend yield to keep your interest in case you get bored. A three year total return of
56.5%. Remember that before the "big fallout" that this was a very profitable business for a long time.
If you think of other
Black Swan economic events for 2012 please comment on my blog and share them with everyone and we can try to flush out investment ideas for it.
Thank you and happy hunting,
Freewilly
For some reason I was looking at the Medical Equipment suppliers, I guess because I was looking for businesses that will have growth no matter what the economy is doing. That brought me to the spin off from the old Tyco Healthcare
Ireland, which charges some of the lowest tax rates on businesses , has been a shining model for the rest of the world on how to do it right. COV now has 20 analyst that have strong buy recommendations on the stock. The Total three year return on the stock is 41.2%. The stock also pays a 1.74% dividend rate currently giving you a nice annual return on investment combined with its growth. The company also operates at a has a nice Net Profit Margin of 16.5%. The Fidelity Select Medical Fund has 12.84% of their fund invested in this stock. Their YTD return so far is 8.73%
COV, I believe, based on fundamentals can make up a solid part of your diversified portfolio. The stock trades on the New York Stock Exchange and Ireland may take a small piece of the dividend paid. My daughter has visited Ireland and she says they are very welcoming to visitors. 
