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Leveraged Gains in Real Estate
06/06/2014 9:00 am EST
Our latest recommendation is an exchange traded fund that is a two times leveraged bet on the daily performance of the Dow Jones US Real Estate Index, explains Nicholas Vardy, editor of Bull Market Alert.
Our recommendation is the ProShares Ultra Real Estate (URE). The strong performance of US real estate stocks this year just might be the most underreported investment theme of 2014.
The Dow Jones US Real Estate Index includes companies that invest directly, or indirectly, through development, management, or ownership of shopping malls, apartment buildings, and housing developments, as well as real estate investment trusts (REITs) that invest in apartments, and office and retail properties.
US real estate is the single best-performing asset class in my firm Global Guru Capital's “Ivy Plus” Investment program. With the allocation to US real estate up 16.36% year to date, no other asset class comes close.
All of this comes even as headlines about US real estate aren't nearly as positive as in the past few years. Scratch the surface, though, and you see that real estate companies are enjoying better cash flow growth as economic data—a reliable long-term indicator of tenant demand—is steadily improving.
I also suspect this year's strong performance has as much to do with catching up to the rest of the market as anything else. After all, US real estate had a tough 2013, barely eking out a 2.13% gain, even as the broader market soared over 30%.
Today, the entire real estate sector is in a technically bullish phase, even as former high flyers in biotech and healthcare have fallen out of favor. So, buy the ProShares Ultra Real Estate ETF and place your initial stop at $78.
Here's a word of warning. This ProShares Ultra Real Estate ETF generates two times the return of the index for a single day. Due to the compounding of daily returns, the ETF's returns over periods other than one day will likely differ from the target return for the same period.
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