Source: Yahoo! —
In this article, we will take a look at the 13 most undervalued REIT stocks to buy according to hedge funds. To see more such companies, go directly to 5 Most Undervalued REIT Stocks To Buy According To Hedge Funds.
The real estate industry has been experiencing a rollercoaster ride over the past few months amid rising interest rates and rapidly changing dynamics in the mortgage markets. However, investors believe the broader industry is expected to see some stability in the second half of 2023. Colliers in its 2023 outlook report for the industry said that stabilization in the global real estate market can “take hold” in mid-2023. The report said that most of the growth in the industry will come from the Asia Pacific region. The report noted that the volatility in the market will cause Asia Pacific investors to have three preferences in 2023. These include offices, industrial & logistics and multifamily/build-to-rent properties.
However, things will not be totally smooth for REITs in 2023. Despite the fact that inflation is now slowing in the US and all over the world and the Federal Reserve is starting to slow down its interest rate hikes, some investors still expect a mild recession this year. A report from investment firm Uniplan Investment Counsel said REITs were expected to generate total returns of -25% in 2022. The report said that this figure was well below the firm’s estimate of total returns of +8-10% for the year.
Uniplan also expects that in 2023, earnings for most REITs will be supported by office space demand. There are several studies which suggest that companies now prefer in-office work routines over work-from-home culture. Major tech companies have also reportedly started demanding their employees to work from offices, at least for a few days in a week. This trend will spark a new demand for office spaces and bode well for the REIT industry.
One of the biggest factors that make REIT stocks attractive is dividends. The Uniplan report said the REIT sector dividend yield stands at 3.7%, which is about 2.5X the S&P 500 index yield. Uniplan said that over the medium- to long-term REITs can up their dividends at 4-5% annually.
As you will see in this article, most of the REITs that are currently undervalued and are famous among smart money are also high-yield dividend players. As investors continue to pile into dividend stocks amid recession fears, REIT dividend stocks will see a growing demand and popularity in the market.
Our Methodology
For this article we used stock screeners to identify REIT stocks that are trading with a PE ratio under 15 as of February 2. We listed stocks from all sub-segments of the REIT industry — mortgage, office, residential, retail, specialty, industrial, among other areas. From the resultant dataset, we picked the stocks which have the highest number of hedge fund investors. To gauge that metric we used Insider Monkey’s database of 920 hedge funds. The list is ranked in ascending order of the number of hedge fund investors.
Most Undervalued REIT Stocks To Buy According To Hedge Funds
13. NexPoint Real Estate Finance, Inc. (NYSE:NREF)
Number of Hedge Fund Holders: 4
NexPoint Real Estate Finance, Inc. (NYSE:NREF) has a PE ratio of 12.53 as of February 2. NexPoint Real Estate Finance, Inc. (NYSE:NREF) has a dividend yield of about 10.3%. A total of 4 hedge funds tracked by Insider Monkey had stakes in NexPoint Real Estate Finance, Inc. (NYSE:NREF) as of the end of the third quarter of 2022.
