3 Cheap REITs to Buy Now - Investment Ideas
September 19 2013 - 5:45PM
Zacks
All eyes were on the Federal Open Market Committee on September 18
as investors awaited an update on the direction of QE3.
The verdict: no taper.
This came as a surprise to many, and the stock
market immediately jumped higher while bond yields fell. One group
of stocks that rallied the most right after the announcement was
real estate investment trusts (REITs).
Considering how beaten down REITs have been since
the Fed first hinted at tapering back on May 22, this rally isn't
surprising. And with tapering off the table at least until the
Fed's next meeting on October 29-30, REITs may just see a strong
resurgence over the next several weeks.
Guilt by Association
A common misperception is that over the last couple
of years, yield-starved investors bid up all dividend stocks to
untenable valuations and that the recent selloff amid the taper
talk was just a normal correction for these overbought
securities.
That may have been the case for some dividend
stocks - REITs included - but not all. Nonetheless, many stocks
sold off heavily this summer despite solid fundamentals as
investors indiscriminately sold high-yielding stocks.
Now these same stocks look downright cheap with
some trading at discounts to their historical averages, which
encompasses eras of much higher interest rates.
3 Cheap REITs
So what are some cheap REITs to buy now?
I ran a screen on Research Wizard in search of
REITs (1) trading at least 10% below their 52-week highs, with (2)
forward price-to-funds from operation (FFO) multiples below 12, (3)
a Zacks Rank of 2 (Buy) or better, and (4) a dividend yield over
3%.
Here are the 3 names from the list:
Campus Crest Communities (CCG)
Percentage from 52-week high: -23%
12-month forward P/FFO multiple: 11.7x
Dividend Yield: 5.9%
Zacks Rank: 2 (Buy)
Campus Crest Communities is a REIT that develops,
builds, owns and manages high-quality student housing properties
located close to college campuses in targeted U.S. markets. It has
ownership interests in 84 student housing properties and over
44,000 beds across the United States.
Hospitality Properties Trust (HPT)
% from 52-week high: -12%
P/FFO multiple: 9.3x
Yield: 6.5%
Zacks Rank: 2 (Buy)
Hospitality Properties Trust is a REIT that owns,
but doesn't operate, 289 hotels and 185 travel centers located
throughout the United States, Ontario, Canada and Puerto Rico.
Cedar Realty Trust (CDR)
% from 52-week high: -24%
P/FFO multiple: 10.2x
Yield: 3.9%
Zacks Rank: 2 (Buy)
Cedar Realty Trust is a real estate investment
trust that owns shopping centers, primarily grocery-anchored
shopping centers straddling the Washington, DC to Boston
corridor.
The Bottom Line
With tapering off the table for now, REITs could
see a relief rally over the next several weeks. And these 3 REITs
appear to be particularly well-positioned to run higher.
Todd Bunton, CFA is the Growth & Income
Stock Strategist for Zacks Investment Research and Editor of the
Income Plus Investor service.
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Learn More>>
CAMPUS CREST CM (CCG): Free Stock Analysis Report
CEDAR SHOPN CTR (CDR): Free Stock Analysis Report
HOSPITALITY PRP (HPT): Free Stock Analysis Report
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