Why I Love Retail Opportunity Investments

This article is part of the Rising Stars Portfolios series.

My first real-money portfolio purchase, Retail Opportunity Investments (Nasdaq: ROIC  ) , or "ROIC" for short, has been quiet since I picked the stock in early November. Since it'll take a little time for the thesis to play out, retail investors have an open window of opportunity to accumulate shares, before fixed-income institutions unearth the story. Watch the video, then read on below:

ROIC is essentially a niche REIT start-up focused on acquiring distressed and low-priced neighborhood shopping centers. The company is run by real estate veteran Stuart Tanz, who has a track record of making money for his shareholders. Tanz and company are opportunistic buyers and disciplined operators who can get every last nickel out of a deal.

The company stays focused and avoids losing money by targeting specific properties with three favorable characteristics:

  1. Geography: coastal states with positive population trends and limited space availability.
  2. Density: densely populated areas where at least 180,000 people live within a one- to three-mile radius.
  3. Income demographics: neighborhoods with median incomes of at least $62,000 a year.

As ROIC converts its war chest into income-producing properties, expect the dividends to flow. As the dividend and yield increases, the market will begin to grant ROIC valuation multiples more in line with more seasoned REITs such as Regency Centers (NYSE: REG  ) and Kimco Realty (NYSE: KIM  ) . ROIC is a high-conviction pick for me, and I expect it to be one of my largest positions in my real-money portfolio.

If ROIC has piqued your curiosity, check out my Rising Star profile, and follow me on Twitter @TMFAloha!

Andy Louis-Charles is an analyst for Inside Value and our special-situations premium portfolio service, Special Ops, and manages a Rising Stars real-money portfolio. If you're interested in learning more about his portfolio, asking him a question, or pitching him a stock, visit his discussion board. Both he and the Fool own shares of Retail Opportunity Investments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (9)

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  • Report this Comment On December 26, 2010, at 5:32 PM, RLepow wrote:

    You are down 5% in a month.

  • Report this Comment On December 26, 2010, at 5:48 PM, goalie37 wrote:

    Down 5% just means an even better entry point. I wasn't planning to sell this any time soon, so market gyrations can only create possibilities.

    Thanks Andy for the tip. I just bought more on Friday.

  • Report this Comment On December 26, 2010, at 6:04 PM, RLepow wrote:

    Buy Ford.

  • Report this Comment On December 26, 2010, at 6:09 PM, RLepow wrote:

    Why would you want a better entry point on a stock when your opportunity cost of missing the 5 percent move in the S&P 500 in November/December is a 200% miss?

  • Report this Comment On December 26, 2010, at 9:34 PM, goalie37 wrote:

    The question of a better entry point is a good one. My firm belief, backed up by experience, is that I am completely unable to predict the short term movements of the market. What I am much more skilled at is seeing when a quality asset is undervalued.

    To give an example. If someone came to me asking to sell me dollar bills at 97 cents each, that would be a good deal. If they came back the next day only asking for 94 cents, that would be a great deal too. In both cases I have bought something for less than it is worth.

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