Quick Take: Investors in the Alpine U.S. Real Estate Equity Fund/Y (EUEYX) had reason to smile last year, when it returned 82%, versus 37% for its real estate fund peers.
Still, portfolio manager Samuel Lieber agrees that in the short run, his $147-million fund can be more volatile than others that invest in real estate, since he’s willing to concentrate his holdings in certain segments of the industry. Lieber’s shareholders can also get a bumpy ride because, compared to similar funds, this portfolio does not emphasize dividend income, which can cushion falling share prices.
Over the long run, though, Lieber points out that the fund’s performance has smoothed over the rough patches in the road. For the five years ended in February, Alpine U.S. Realty returned 22%, on average, versus 16.6% the average real estate fund.
The Full Interview:
What’s a railroad doing in a real estate mutual fund?
The explanation is simple. The company in question, Florida East Coast Indus (FLA), acquires, develops and manages commercial properties through one subsidiary, and operates rail lines through another.
The holding may seem atypical for an investment vehicle like the Alpine U.S. Real Estate Equity Fund, but then the fund is not typical of similar offerings, says Samuel Lieber, who runs the portfolio.
Lieber explains that he hunts for stocks among a larger group of companies than his counterparts, and unlike them, he is more focused on capital appreciation than income generation. As a result, the fund may not pay as much in dividends as its peers.
Funds like Lieber’s generally bulk up on real estate investment trusts, or REITs, which are publicly traded companies that invest in real estate holdings and have to pay out the majority of their annual income through dividends.
Income, though, is a secondary consideration for Lieber. So, while he will own REITs, and sometimes gives them the most space in his portfolio, he also buys home builders, hotel chains, and companies like Florida East Coast that have significant real estate operations in addition to other businesses.
Home builders currently account for about 62% of the fund’s assets, and lodging companies make up another 14%, says Lieber, who expects these sectors to gain if the economy continues to rebound. Roughly 20% of the portfolio’s holdings are in REITs.
As a stock picker, Lieber looks for cheap shares of companies generating strong returns on equity and invested capital. Healthy margins, sound balance sheets and relatively low debt are on his check list, too, he says, as is “double-digit growth potential.”