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In late 1999, common stocks were showing evidence that they were significantly overvalued. We knew we had to develop a plan and move from common stocks to a new Macro Investment Group. At the end of our analysis there were three Macro Investment Groups that appeared to be undervalued. These three groups were Preferred Stocks (which usually act like bonds), real estate in the form of REITS (Real Estate Investment Trusts), and Master Limited Partnerships (like oil/gas utilities). All of these areas turned out to be good places to make money. They were good investment areas because all the investments appreciated in value and most paid excellent dividends.

By early 2000, we had moved out of common stocks into general Preferred Stocks, Master Limited Partnerships, and REITS via their Preferred Stocks. As common stocks began to dive, our new investments achieved an annualized return of 28%. When we closed our positions in preferred stocks and master limited partnerships all 36 positions were profitable. In addition, they had paid dividends ranging from 6% to 14%. These positions were sold within 10% of their 2001 highs. We used the elements of the Owl 401k Guide and the Eagle Investor to manage these two transitions.

Results Summary
Look at the Dow Jones REIT Index, focusing on December of 1999 and January of 2000, when we were actually changing Macro Investment Groups. Remember, most of these REITS also paid excellent dividends.

Since there are no indexes on Preferred Stocks or Master Limited Partnerships that we are aware of, here is a partial sampling of some of the companies we studied in 1999. AmeriGas Partners, L.P. (APU), Dillards (DDT), Federal Realty Investment Trust (FRT), Health Care Property Investors, Inc. (HCP), Hospitality Properties Trust (HPT), Kaneb Pipe Line Partners, L.P. (KPP), Northern Border Partners, L.P. (NBP), and Public Storage, Inc. (PSA). We owned some of these investment instruments, but not every one of them.