As vaccines continue to be given in larger quantities and huge parts of the economy begin to reopen, investors are trying to determine how they should invest in a post-pandemic world.
With the fall in tech stocks and market momentum shifting towards value investing, it’s clear that all eyes are on the battered sectors that promise big profits in an economic recovery. Movie theaters, airlines, and physical retailers are just a few of the industries investors are looking at, but they shouldn’t forget real estate.
Real estate investment trusts, or REITs – companies that must distribute at least 90% of their taxable income to shareholders each year as dividends – were beaten in 2020. While the S&P 500 climbed about 18% in over the past year, the real estate sector finished down 2%. Fortunately for investors, this means that there are plenty of cheap REIT stocks ready to take off as the economic recovery begins. Here are the three real estate sub-sectors that investors should watch out for this year, along with a cheap REIT by sub-sector to add to your portfolio:
- Shopping centers: Federal Real Estate Investment Trust (symbol: FRT)
- Lodging: AvalonBay Communities (AVB)
- Data centers: Digital Real Estate Trust (DLR)
Shopping centers: Federal Real Estate Investment Trust (FRT)
Brick-and-mortar retailers were hit hard last year as consumers stayed home, shopping and ordering online in record numbers.
Even though retailers struggled, they didn’t feel the pain quite like malls and malls – while their tenants may have been able to switch to online retailing, mall owners were left behind. lagging behind. The result was an extremely difficult year for shopping center REITs like Federal Realty Investment Trust, whose shares fell about 30% in 2020.
Much of Federal Realty’s real estate portfolio consists of shopping centers – some are anchored in grocery stores and others are so-called “super regional” malls, but all have seen a dramatic decline in activity over the past year.
Still, Anish Malhotra, co-founder and CEO of Plotify, believes now is exactly the time to invest in shopping center REITs like Federal Realty. He believes that “once collective immunity is achieved, we will begin to see vengeance eaten, revenge train and even revenge pampered” that will directly benefit malls and shopping centers.
Other macroeconomic factors should benefit malls like those owned by Federal Realty, including an urban exodus to suburban homes. Malhotra believes the combination of larger suburban populations combined with more time spent in the suburbs thanks to the flexibility offered by working from home “will continue to generate heavy foot traffic in outdoor retail businesses for years to come. “.
Federal Realty, with properties located in and around some of the nation’s largest metropolitan areas, will reap the benefits of these trends, while shareholders will enjoy a 4.2% dividend yield.
XNYS: FRT | 11:14:03 AM
Data as of 11:14:03 AM to 03/26/2021
Accommodation: AvalonBay Communities (AVB)
The US real estate market has become incredibly hot in recent months as housing supply shrinks and home prices soar.
The problem is that many millennials who have moved to large metropolitan areas for work and play now find themselves unable to take advantage of either, and they have started to look to the suburbs for better quality. of life.
Ed Carey, CEO of Audience Town, said “Urban knowledge workers are moving in large numbers to suburbs, warmer weather, lower taxes and smaller towns.” With good homes in short supply, many of these young workers have no choice but to rent for a period of time before finding a home.
How do investors profit from it? Carey says “REITs with suburban holdings and high exposure in multi-family homes for next year will be good,” and he points to AvalonBay Communities as a perfect choice.
AvalonBay had a tough 2020, with core operating funds down 7% and same-store revenue down 3.2%. That said, the occupancy rate improved in the fourth quarter and the company expects new developments to start rebounding during 2021. A large, diverse portfolio of properties along with favorable housing market trends make AvalonBay a solid choice for an economic recovery – and a 3.4% dividend yield doesn’t hurt either.
XNYS: AVB | 11:29:59 AM
Data as of 11:29:59 AM to 03/26/2021
Data Centers: Digital Realty Trust (DLR)
The pandemic has triggered a domino effect of change, and perhaps the biggest change has been the shift to a work-from-home business model.
Over the past year, many companies had no choice but to let their employees work from home, which created a huge demand for data as people jumped on the internet not only to clock in at the office, but also to stream movies and download video games in record numbers.
This has been a godsend for Digital Realty Trust, one of the largest data center real estate companies in the country. As people continue to work from home and businesses invest more in cloud computing, Digital Realty is well positioned to capitalize on it.
Ryan P. Johnson, director of portfolio management and research for Buckingham Advisors, believes Digital Realty has a big opportunity ahead of him. In the short term, he expects margins to increase thanks to “higher occupancy rates and merger synergies resulting from the takeover of InterXion”, a European data center operator DLR acquired last year. Looking to the long term, Johnson says Digital Realty has “a long way to grow as the global digital economy continues to grow and the needs for data storage and processing increase.”
In the meantime, investors will enjoy a strong dividend yield of 3.4%.
XNYS: DLR | 11:40:40 AM
Data as of 11:40:40 AM to 03/26/2021