Risk vs volatility

With REITs continuing to whipsaw either up 1%-2% or down 1%-2% on any given day, I want to take the time to highlight a key difference between risk and volatility.  2CHYP is quite volatile, often moving more than the market as a result of its overweight to small caps.  However, I do not believe that it is riskier than the REIT index from a fundamental standpoint.

A volatile market only affects prices, not cashflows, and 2CHYP is cash flow heavy.  We normally only show this analysis quarterly, but given the erratic market, I find it calming to look at it a bit more often.

The portfolio is set to generate annual FFO of $12,187, based on Capital IQ consensus estimates.  This equates to an FFO yield of 11% against capital.  This cash flow fuels a 7.89% portfolio dividend yield at a payout ratio lower than that of the index.

It would be quite nice if the market would cooperate and show our stocks some love, but 2CHYP is set up to not rely on price appreciation as it provides a decent return through its internal cashflows.  Thus, I remain unconcerned with market price volatility and intend to use price disturbances as opportunities.

Our concerns are more focused on identifying fundamental problems in the portfolio.  Presently, we do not see any deterioration, but we will keep our eyes wide open.

Commentary may contain forward looking statements which are by definition uncertain.  We retain no obligation to update or correct forward looking statements should the available information change.  Actual results may differ materially from our forecasts or estimations.

2CHYP Portfolio Snap Shot

8/17/17 2CHYP Performance since inception

2CHYP Weekly Trade Confirmation Report