The stock market is becoming quite unpredictable as the COVID-19 pandemic plays out, high unemployment lingers and the federal unemployment stimulus comes to an end. This could be a good time to exit risky stocks and move money into Real Estate Investment Trusts (REITs).
REIT are companies that own, operate, or finance income-generating real estate. REITs have historically outperformed stocks during most recessions. They produce cash flow that is highly resilient to downturns and they are much more durable than the average businesses.
Choosing between the seemingly endless number of REITs is easier said than done. Below, we shed light on some of the top REITs worthy of investor attention: American Tower Corp. (AMT), Equinix (EQIX), Digital Realty Trust (DLR) and W.P. Carey (WPC).
American Tower Corp. (AMT)
The demand for AMT’s services will likely remain quite high amidst the recession simply because it provides the in-demand towers used for wireless communication. AMT has nearly 200,000 towers across the world.
Investors are looking to get in on the 5G rollout so AMT is in prime position.Add in the fact that fewer people are visiting one another in-person due to the lingering coronavirus and it makes even more sense to invest in a wireless communications provider.
The POWR Ratings have AMT ranked as the top Diversified REIT, out of 50 in the category. In fact, AMT has A grades in all POWR Components except for its Industry Rank, in which it has a B.
Check out AMT's price returns and you will find plenty of green: a 47.87% price return in 2019, a 101.68% price return across three years and a 24.64% price return across the past year. The average analyst price target for this stock is just under $270 so there is some upside to go.
Furthermore, 11 analysts recommend buying AMT, two recommend holding and none recommend selling. With a forward P/E of 30, AMT is reasonably priced at its current level.
Equinix (EQIX)
Managed IT infrastructure, network neutral colocation and data center services are some of the safest bets amidst these uncertain times. EQIX provides these services and more. In fact, the POWR Ratings have EQIX ranked #1 out of 6 in the Data Centers REITS category.
EQIX has A grades in all the POWR Components except for its Peer Grade of B. EQIX price returns are in the green but for 2018. In fact, EQIX had a 43.22% price return across the past year along with a 68.86% price return in 2019. With a forward P/E of 28, EQIX is fairly priced.
EQIX customers range from Verizon to Oracle, Zoom Video and other heavyweights in the tech world. If you are a growth investor, you should give serious consideration to this REIT.
Digital Realty Trust (DLR)
If you are like most investors, you are searching for opportunities to invest in companies that own tech-related real estate. DLR is one such business. In fact, DLR recently announced all of its facilities are fully operational amidst the coronavirus pandemic. DLR’s tech geeks are advanced to the point that they can still operate their facilities in the event that remote operation is necessary.
The DLR POWR Ratings are quite impressive: an A Trade Grade, an A Industry Rank, a B Buy & Hold Grade and an overall rating of "Buy." DLR price returns are in the green going back to 2015 but for 2018 when the stock produced a -3% price return. The average analyst price target for the stock is $152.92, meaning there is nearly 8% upside to go.
W.P. Carey (WPC)
Net lease REITs are different from regular REITs in that their tenants are required to manage property operational costs. This means the likes of WPC are comparably low-risk. However, most net lease REITs are in the retail space.
Thankfully, WPC derives less than 20% of its revenue from retail properties. This is quite the diversified REIT with one-quarter of its revenue stemming from industrial, another quarter stemming from offices and 20% from warehouse operations.
The POWR Ratings have WPC rated as Neutral, highlighted by a B Peer Grade. The stock is ranked 11th out of 50 in the Diversified REITs segment.
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AMT shares . Year-to-date, AMT has gained 11.61%, versus a -3.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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