Written by Nick Ackerman, co-produced by Stanford Chemist

The Calamos Strategic Total Return Fund (CSQ) offers investors an attractive blend of convertible exposure and common equity exposure. Equities dominate the largest allocation of the fund’s portfolio, led by the tech sector. Though the allocation to tech isn’t egregiously large overall. In fact, the allocation of tech is smaller than that of the S&P 500. The strong returns since the GFC have also given investors a few distribution boosts since then, with the last dividend increase happening earlier this year.

CSQ seeks “total return through a combination of capital appreciation and current income.” Its investment strategy is quite simple: “investing in a diversified portfolio of equities, convertible securities and high yield corporate bonds.”

Essentially, the investment managers can posture the portfolio in whatever particular composition they deem the most attractive. That can result in some superior returns if they get it right. While the opposite is just as true, the current management team has been able to deliver more than reasonable returns. Calamos also has experience in the convertible space, with its line-up of CEFs offering exposure to these investment instruments. That being said, CSQ is one of their funds that actually has the least exposure to this space.

Convertible stock can be beneficial for some investors, as they have features of both equities and fixed-income. This means they can also be potentially more volatile than regular fixed-income instruments, as the conversion feature results in movement based on the equity of a company. However, that also potentially allows for upside when a conversion takes place – all the while collecting a fixed interest rate on their holding. Typically, retail investors do not get exposure to these investments, as they aren’t traded on exchanges. They are level 2 assets though, so liquidity

September hasn’t been too kind to Getty Realty (NYSE:GTY), as the shares have declined by 11% since the start of the month. Undoubtedly, fears of another surge in COVID-19 have weighed on the share price. However, I believe the decline is largely unwarranted. In this article, I show why the shares are an attractive investment at the current valuation; so let’s get started.

(Source: Company website)

A Look Into Getty Realty

Getty Realty is a leading net lease REIT that specializes in the ownership of Gas Stations/Convenience Stores, and other automotive properties. It currently owns 946 properties that are spread across 35 states. As seen below, the properties well diversified, with exposure to much of the United States.

(Source: Company Earnings Presentation)

What I like about Getty Realty is the need-based products and services that its properties provide. Its properties are generally located in densely-populated, high-traffic areas. Currently, 55% of Getty’s ABR (average base rent) comes from the top 25 MSAs (metropolitan statistical area). This is further supported by the fact that 71% of its properties are at corner locations, which helps them to garner the most traffic. As seen below, New York City, Washington D.C., and Boston represents 37% of Getty’s ABR on a combined basis.

(Source: Company Earnings Presentation)

Despite headwinds from COVID-19, the portfolio occupancy remains very strong at 99% (unchanged from the same time last year), with a weighted average 10-year lease term. What I also find encouraging is that the unit level rent coverage actually improved on a YoY basis, to 2.3x in the latest quarter, which is up from 2.2x in the prior year quarter.

Rent collection appears to be manageable, as the company received 96% of its rents in the last quarter, with just 2.3% of its rents being deferred on a

Article Thesis

W. P. Carey (WPC) is a REIT that operates in an attractive, low-risk niche of the industrial real estate sector. The company has generated solid growth in the past, and should be able to grow its funds from operations going forward as well. It offers reliable dividend growth and an attractive dividend yield of close to 7%, while shares also have upside potential of up to 50% over the next couple of years. The combination of these factors makes WPC worthy of a closer look.

Triple net REITs

Source: StockRover

Compared to its peers in the triple-net space, WPC has a below-average valuation (in terms of cash flow and EV/EBITDA), while also providing an above-average dividend yield. Last but not least, its valuation is on the lower end of the 5-year range, whereas many of its peers are trading above the historical valuation median.

WPC Is A Strong Triple-Net REIT In The Industrial Space

WPC is a triple-net REIT, but unlike many peers such as Realty Income (O) or National Retail Properties (NNN), it is not focused on retail real estate. Instead, the REIT mainly owns warehouses, industrial properties, and some office buildings, which naturally don’t have to worry about the impact that online retailers have on the brick-and-mortar retail space.

WPC is active in both the US (63%) and Europe (35%). This results in some geographic diversification, although it adds some currency rate exposure.

WPC business model

Source: WPC presentation

WPC has some advisor business on top of managing its own properties, but with just below $3 billion of AuM, this side of the business does not provide a large portion of revenues and cash flows.

The company owns more than 1,200 properties, and there is a lot of diversification across tenants, with more than 350 tenants in total. The top 10 tenants