These Stocks Could Be Too Hot

Tickers in this article: BX WY

It is also prudent to point out that WY shares are just as likely to test the 52-week high share price of $31.74. If the stock closes above that level it could conceivably form a new top before correcting. Those who care to invest at these levels may want to buy some "insurance" in the form of put options.


Another high-flyer is Blackstone Group (BX) , which since Nov. 16 has experienced a 48% skyrocket ride for its share price. BX is a diversified alternative asset management and financial advisory services company. Lately the spotlight has been on its real estate business.

It's been reported by several reputable news services that BX has accumulated an enviable portfolio of houses (three million, approximately) the company bought at distressed pricing and plans to use as rentals. In many areas of the nation there is a shortage of rental houses, and those are the regions BX has been targeting.

The best way to learn about Blackstone Group is to carefully peruse its informative Web site . You can easily find its full-year 2012 earnings report as well as its fourth quarter 2012 results. Personally speaking, I think this company is brilliantly led and operated.

What I want to show you, however, is the five-year chart of the stock's performance. The share price movement looks like a roller-coaster ride, yet its trailing 12-month cash from investing helps me understand why the stock hit a new 52-week high on Tuesday.

BX ChartBX data by YCharts

Shareholders are currently paid a handsome dividend for holding shares of BX. The current yield-to-price is still an impressive 8.77% based on the closing price of $19.15. My concern is this yield represents a payout ratio of over 300%!

Maybe that's based on all the new rent money that will be flowing in during 2013. But it takes time to buy existing houses, prepare them for occupancy and then put them on the market as rentals. When the three million houses are rented and the cash flow starts coming in, the upside on BX should be pretty!

In the meantime, if you own shares, one way you can protect yourself is by using a "stealth" trailing stop-loss system like TradeStops, to which I subscribe. It sends subscribers a timely alert when shares have dropped to your pre-determined stop-loss levels without the market makers being able to see where you intend to sell.

These are exciting times for real estate-related investing. Those who bought shares of BX on the way up should be encouraged. For those who didn't, patience and a reasonable 5% to 10% price correction will open the gate for a more opportunistic buying opportunity. The same can be said for WY.