Investors looking to participate in the recent rally in real estate stocks should focus on quality, Bank of America said. The real estate sector of the S&P 500 has been trending higher over the past month or so, and is up 10% year to date after posting losses earlier in the year. The sector hit a new 52-week high last week. REITs are also an income play and often pay attractive dividends. “In an environment where the Fed is cutting interest rates, stocks with healthy yields are becoming increasingly is increasingly attractive. She added that her research on small-cap and mid-cap stocks also shows that dividend yields are the best hedge against cyclical risk. SPLRCR YTD Mountain S&P 500 Real Estate Sector The Fed began its rate-cutting cycle last week. , cutting the federal funds rate by 50 basis points. The central bank also said it would cut rates by another 50 basis points before the end of the year. In this environment, Bank of America likes health care, residential and retail REITs, Hall said. Play on aging America, which will lead to more people seeking health services and senior housing, she added, adding that demand continues to grow for residential REITs and most retail REITs. Both beat expectations and raised guidance when picking specific stocks, the bank’s head of U.S. REIT analyst Jeffrey Spector recommends focusing on high-quality growth, high-quality value. and (given a soft landing scenario) high-quality risk stocks. “Higher quality REITs will provide the best income and distribution growth,” he wrote in the same note. Quality REITs have resilient pricing power, multi-year earnings visibility based on long-term growth drivers, strong and flexible balance sheets, and the highest prospects for global capital inflows. Here are some of the names on Spector’s top list. Welltower is the only large-cap stock on the list. The remainder are small- and mid-cap REITs. Welltower owns and develops senior housing, skilled nursing/post-acute care facilities and medical office buildings. In the short term, Bank of America believes Welltower will benefit most from accelerating occupancy growth during the post-pandemic recovery. “Additionally, we believe senior housing rate growth will remain strong in 2024 and beyond,” the bank said. “WELL has the highest exposure to senior housing operating assets within our coverage universe and has the best Positioning the Portfolio “Longer term, demographic trends are favorable as the baby boom generation continues to age. Welltower shares are up 40% so far this year. Mid-America Apartment Communities and American Homes 4 Rent are both residential plays. The former is a multifamily REIT that operates in communities in the Sunbelt region, which banks believe is “We remain positive on AMH’s portfolio of single-family homes,” Specter wrote, adding that the region has strong job growth and a lower cost of living. Limited new supply, structural demographic tailwinds from aging Millennials, value-added consolidation/development opportunities, and strong management. Mid-America Apartment Communities is up nearly 18% year to date, while American Homes 4 Rent is up nearly 7%. Finally, Federal Real Estate Investment Trust owns, operates and develops retail real estate in coastal markets. Spector said the “Blue Chip Retail REIT” has a diversified portfolio of shopping malls and should generate higher growth than its peers in the long term. The stock has gained more than 9% so far this year.
These real estate stocks top Bank of America’s buy list | Real Time Headlines
RELATED ARTICLES