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Motley Fool: An opportunity in retail

Retail Opportunity Investments Corp.’s Old Town Square development in Wilsonville, Ore. (ROIC)
Retail Opportunity Investments Corp.’s Old Town Square development in Wilsonville, Ore. (ROIC)

Real estate investment trust (REIT) Retail Opportunity Investments Corp. focuses on buying and revitalizing necessity-based retail properties in mid- to high-income areas. This means its properties are most often anchored by large grocery chains, ensuring a steady flow of traffic and stable tenants, which will keep rents growing and lease rates high.

As of last quarter, the company was on track to post its third straight year of portfolio lease rates above 97 percent, while same-space comparable base rents climbed 39.9 percent and 8.4 percent year over year on new and renewed leases, respectively.

Investors can expect the size of the company’s portfolio to continue growing, thanks to the deal-making savvy of CEO Stuart Tanz, who previously guided Pan Pacific Retail from its $146 million IPO in 1997 to its $4.1 billion acquisition by Kimco Realty nine years later. The company has already spent $314 million in shopping-center acquisitions so far in 2017, bringing its total portfolio to more than 10 million square feet of retail real estate that should prove resilient even as online shopping keeps growing its share of retail sales.

Retail Opportunity Investments’ stock recently yielded about 3.8 percent. Shares seem roughly fairly valued at recent levels, and the stock is worth consideration for long-term investors who like steady, growing dividends. (The Motley Fool owns shares of and has recommended Retail Opportunity Investments.)

Ask the Fool

Q: Does it make sense to have multiple IRA accounts? – F.W., South Bend, Indiana

A: It could. You might have a traditional or Roth IRA through a regular brokerage for investing in individual stocks. Meanwhile, you might open another IRA with a mutual fund company, if it’s the best way for you to invest in a particular fund (some funds are not available through brokerages). Also, if you change jobs, you might roll over money from your 401(k) into a new IRA, so that you can manage that money separately.

Multiple accounts are fine, as long as you can keep track of them all. Know that the contribution limit for 2017 (and 2018) is $5,500 ($6,500 for those 50 or older) – and that’s all you can contribute in total.

Q: I’m a teenager – how should I invest my money? – C.T., Walnut Creek, California

A: First of all, keep any money for college out of stocks, as you never know when the market could pull back for a while. Money you’ll need in the short term is best kept in safer places, such as CDs. (You can look up good CD rates at bankrate.com.)

For long-term money, though, it’s hard to beat the power of stocks. Teens have lots of time on their side. If you invest $1,000 in a stock index fund, and it earns the market’s historical average annual return of about 10 percent, in 30 years, when you’re perhaps around 44 or 47, it will top $17,000. Add to it over the years and you could retire early as a millionaire!

My dumbest investment

My dumbest investment? How about buying shares of Lehman Brothers two days before it collapsed in 2008. Too big to fail, dead cat bounce … none of that panned out. – J.W., online

The Fool responds: Lehman Brothers’ demise was the largest bankruptcy in U.S. history, as the company had nearly $700 billion in assets! As you noted, the thought that the company was too big to fail didn’t hold true – nor did it deliver a “dead cat bounce,” where a sinking investment has a temporary pop.

This episode in financial history offered many lessons, though. For example, if an investment seems too good to be true, it probably is.

At the time, financial giants such as Lehman had pursued a strategy of growth at any cost, so they leveraged themselves to the hilt (i.e. used a lot of borrowed money). Overconfident, they were too slow to realize that their futures were in jeopardy.

It’s not always easy to spot companies that are headed for trouble, but one red flag is when an enterprise is, without a clear reason, growing much faster than its peers. Companies with lower levels of debt tend to have stronger balance sheets and to be less risky.

A final lesson is this: If you don’t fully understand a company’s financials and how it makes its money, steer clear. There are plenty of appealing and easier-to-understand companies.

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