Keep cash ready for buying opportunities

Selling a stock like Digital Realty Trust, which hasn't gained much lately, will free up cash for whatever the current market brings.

By Jim J. Jubak Jun 26, 2012 4:04PM
Image: Woman counting money (© Jose Luis Pelaez, Inc/Blend Images/Getty Images)Digital Realty Trust (DLR) will pay its quarterly dividend on June 29 to shareholders of record on June 15. The REIT (real estate investment trust) went ex-dividend on June 13. That means you'll receive your dividend as long as you held on June 13. And you're now free to sell without losing the dividend payment.

I'm going to take advantage of that timing to sell Digital Realty Trust out of my Jubak's Picks portfolio Tuesday. The REIT has gained 1.23% in capital appreciation since I added it to the portfolio on March 23, 2012. The 73 cents a share in quarterly dividends (buying on March 23, I missed the March dividend payout with its record date of March 15) paid in June add another 1.01% in income to that return. The total return since purchase on March 23 then comes to 2.25%.

Even in this market, I'm not about to write home about 2.25% in three months but this pick did what it was supposed to do -- it held its value (and a little more) and provided some yield while I waited to see where stocks might be headed.

So why sell now?

First, because I'd like to convert that store of value in Digital Realty Trust into cash that's readily available for use in case I get a too-good-to-pass-up buying opportunity as a result of this summer's market volatility.

Second, because the potential fall-out from a failure to address the euro debt crisis at this week's European summit could take down even a dividend offering like this.

And third, because on June 26 Digital Realty Trust announced that it would spend $1.1 billion to buy three data-center properties near London. And that to help fund the acquisition it will sell 8.35 million shares in a public offering. That will add about 7.6% to the company’s 110 million shares currently outstanding.

I think that buying new properties that can be turned into turnkey data centers or that can be leased to companies looking to build out data centers is, in the long run, a good idea for Digital Realty Trust. Real estate prices are very attractive in European markets at the moment. But in the short run, I don’t think I want to increase my exposure to the shaky economy in the United Kingdom. I think I'll be able to re-buy Digital Realty Trust with lower risk -- and maybe a lower price -- in September or so.

And in the current market I’d like to have the extra flexibility that cash gives.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of Digital Realty Trust as of the end of March. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 
Tags: DLRinvesting strategyinvestmentsJim JubakKim Peterson
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13Comments
Harvey Flax (act like an adult)
Jun 27, 2012 2:00PM
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   My 10 year old grandson could have written the above article, all those words to explain nothing, the gibberish that pours

  out of the market "experts". I expect more from Jubak, talk to us as adults, not bedtime stories .

 I remember reading a comment , when asked by a new arrival at a brokerage house, "what do they expect me to do, I

 don't know much about the market". The response was "nobody here knows s---t, just bluff". That's the Market in a nut-shell.     HFlax 

 

Down4good
Jun 27, 2012 1:23PM
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Good advice. It takes a lot of discipline and patience to implement. I just sold a rental home and have been gradually liquidating long bonds. Worst case, I expect to be able to buy them both back for less later. All the cash is going into money markets waiting for that or another bloodbath to buy back into. That’s how the bottom fishers like Buffett play the game, right? I’ll take the inflation hit and loss in purchasing power for a few years to remain positioned for that kind of opportunity. Meanwhile, all the daily market talk, predictions, promises, and pitches by market experts is just useless babble to me.

 

My buy in targets:

 

S&P 500 @ 6000

Gold @ $1200

Silver @ $20

Oil @ $65

Rental Real Estate (give me two years of property taxes and I’ll take it off your hands)

the blamee
Jun 27, 2012 10:55AM
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Yes. "Keep all your cash ready." Becasue we won't stop until we have stolen it all.
Dave the slave
Jun 27, 2012 10:35AM
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Let's just get rid of the whole thing and start over. the Obama Admin has been lying about everything. this Admin is dismantling this country everyday and if we go for another term we won't last through 2013.
Theprophetofprofit.
Jun 27, 2012 1:48AM
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Keep your cash ready  for buying opportunities, but only after we see if the fiscal cliff is avoided, and the adults are back in charge after November.

 

Otherwise, buy the pharmacuetical companies. We are all going to need lots of meds to get through four more years like the last.

usual suspects
Jun 26, 2012 4:51PM
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I'm ready for a sure thing!!
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