Let’s go shopping….for a REIT

“Whoever said money can’t buy happiness simply didn’t know where to go shopping” – Bo Derek (picture not included)

When providing our market calls each week, we typically try and focus in on bigger themes or bigger investments that will garner the greatest interest for the majority of our readers.  Sometimes though, projections for the “less traveled” are tough to ignore.  This week, that is very much the case.  A great example of the power of our pattern recognition technology to generate trade ideas is with a REIT, Taubman Centers (TCO).

Taubman Centers is a $4B Market Cap stock, which operates 30 high-end shopping centers mainly in the U.S.  The stock hit a high of about $89 in May of this past summer, and then dropped all the way back to a two year low of $63.65 on December 20^th, a drop of about 30%.   It has rebounded a couple bucks over the past month, and now sits at a price of $65.47.

When a stock plummets like this, it’s usually easy to find the catalysts, e.g. big miss on expectations, news, event, etc.  For Taubman, it’s much less obvious.  The longer term concern appears to be how much online retailers will continue to steal from the malls, but the recent economic news for mall traffic has been encouraging.  The latest jobless claims numbers were better than forecast and retail sales numbers were solid.  Was the stock over appreciated when it was at $89?  Are we in oversold territory now?  Either way, there certainly seems to be a divorce from the price of Taubman and the fundamentals.  When this is the case, where do you turn for answers?

We took the last 6 month price pattern for Taubman Centers, and looked at all REIT’s historically to objectively (statistically) identify when we have seen this trading behavior in the past and to see what typically happens next.  The performance of this price pattern, in the next 3 months historically, is hard to ignore.  In 36 of the 41 highly correlated historical instances of this 6 month price pattern in REIT’s, the stock was up in the next 3 months and the average return of all 41 was a whopping 30.87% for just 3 months.

EidoSearch subscribers can also take this price pattern and search for other stocks, with the click of a mouse, that are currently exhibiting a similar price pattern and that might also be well poised for a run up.

Please see the charts below for Taubman.

Six month price trend for Taubman Centers (TCO)

Chart of the 41 highest correlated historical instances of this 6 month pattern in REIT’s, and

the average return of those instances in the next 3 months of 30.87%