In recent months REITs have been outperforming the broader markets and fundamental data suggests this will continue. Consensus estimates now show REIT growth in 2019 surpassing that of the S&P. REITs have been cheaper than the S&P for a while, but now REITs will have both relative value and relative growth.
Some REITs have recovered more than others which affords rebalancing into the ones that remain the cheapest. Plymouth has recovered quite nicely and its pricing action afforded a sale today. We had a $15.50 ask order sitting above market in Plymouth for much of the day, and it got filled 1 minute before close. We will potentially be cycling the proceeds into STAG Industrial so as to maintain exposure to the strong fundamentals of the sector.
Other growth sectors within REITs
Tower REITs remain high multiple and, in my opinion, too expensive to buy here. We have a tiny bit of exposure from Uniti’s tower division, but that may be reduced soon as Uniti is exploring a potential sale of its Latin American tower business. I consider this a great time for Uniti to sell these assets as private market prices are quite high which suggests the potential deal
Data center REITs have gotten a bit cheaper, but Iron Mountain remains the best value. I think the market may be incorrectly trading the data center REITs in tandem with the microchip stocks which could lead to some nice mispricing
Manufactured housing remains the fasting growing REIT sector in terms of same store NOI growth and UMH remains the best value in the space. It may have one more bad quarter in terms of headline numbers due to its securities portfolio, but these 1 time paper losses have little bearing on its long run value.
2CHYP Portfolio Snap Shot
1/17/19 2CHYP Performance since inception
Performance Disclaimer. Past Performance does not guarantee future performance. Markets are uncertain and there is no level of return that we can guarantee. Trading of equities can result in material or total loss of principal.