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'Bricks and Mortar' Portfolio Posts Big Gains

Editor's note: "Bricks and Mortar" is a mock portfolio created by reporter Nicholas Yulico that is meant to help generate real estate and gaming-related stock ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks.

The fourth quarter started off with a bang for the broader stock market on Monday, and the Bricks and Mortar mock portfolio surged on the rally.

The portfolio is now up 23.2% since its inception in late January, handily beating the S&P 500's return of 8.3% in the same period.

Such outsized returns make it a nice time to examine what's working and whether there are still stocks left to buy in the real estate and casino sectors.

From a top-down sector perspective, I believe homebuilder stocks will remain a disaster and should not be bought. I've been bearish on the group for a year now and continue to flag Ryland (RYL) as overvalued.

There's no reason to buy into a group where nearly all builders are reporting losses, and the future will get uglier because of pricing wars across the industry -- a thesis I laid out in a recent article . I believe the two-day rally this week in the stocks will be temporary and will eventually fade once investors realize a housing recovery is more than a year away.

Real estate investment trusts, or REITs, have reported strong fundamentals in recent months, but the stocks are off about 10% this year. Takeout premiums left the sector after the credit crunch that has shut off new private-equity deals. Nonetheless, office owner Brookfield Properties (BPO) remains a solid bet.

There also remain a few good buys in the lodging and casino space, such as portfolio holdings Melco PBL (MPEL - Get Report) and Starwood Hotels (HOT - Get Report).
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BPO $20.52 0.00%
HOT $72.84 1.39%
HLT $23.59 1.59%
MPEL $16.34 0.55%
RYL $40.83 0.67%


Chart of I:DJI
DOW 17,888.35 +168.43 0.95%
S&P 500 2,102.63 +22.22 1.07%
NASDAQ 5,156.3060 +47.64 0.93%

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