Start Looking at REITs (CLI, OFC, SUSIX, AVG, EQR)
Via SmartMoney.com -- REITs have taken a pummeling recently: As of Thursday, the MSCI U.S. REIT Index had declined 19% from its July 22 peak -- worse than the 14% drop for the Standard & Poor's 500-stock index.
That's an opportunity, says Kevin Beddell, manager of the JPMorgan U.S. Real Estate fund (SUSIX). "It's a Goldilocks situation, with low interest rates but also strong demand and tight supply," he says, "and we've had a nice correction, so now prices are attractive, too."
Keeping reading Masters for more of the tickers you should be checking out.
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Taken from SmartMoney.com -- Mr. Bedell prefers high-quality suburban office property, which offers more income for the price. "It's not quite as prized as property in city centers," he says. "But the discounts in the suburbs are overdone right now."
Among Mr. Beddell's favorite REITs is Mack-Cali Realty (CLI), based in Edison, N.J., which has diversified property on the eastern seaboard and offers a dividend yield of 6.4%. It's a stable portfolio and the company is able to borrow at attractive rates, he says.
Another is Corporate Office Properties Trust (OFC), based in Columbia, Md., whose shares have lost 28% since the end of June, perhaps because of the portfolio's focus on government tenants, especially in the defense field. Investors fear defense spending cuts, but the REIT is focused on information technology tenants that are better protected than weapons makers from cuts, according to Mr. Beddell. The dividend yield is 7%.
Multifamily housing is also well positioned, says Haendel St. Juste, an analyst with Keefe, Bruyette & Woods. With the single-family market having tanked, there's "huge negative sentiment" toward buying a home, he says. Each 1% drop in the homeownership rate brings more than a million new renters, he estimates, and supply hasn't kept pace. What's more, the population of 20- to 34-year-olds, a key renting demographic, is swelling, says Mr. St. Juste.
Mr. St. Juste recommends shares of AvalonBay Communities (AVB) and Equity Residential (EQR), which focus on pricey coastal areas like New York, D.C. and Seattle, rather than "sun belt markets, where the jobs don't offer a lot of pricing power for landlords." Continue at SmartMoney.com
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