Apartment REITs Show Promise

Includes: AIV, CPT, MAA, O
by: Volatility Research

Apartment Investment & Management Co. (NYSE:AIV) has been claimed to be oversold by Forbes, as a result of AIV's RSI reaching 29.5, which is considered to be the beginning stages of an over-purchased security. The public should reevaluate this REIT's RSI rating as a fundamental indicator that this stock has entered bear territory; unfortunately the misinformed investing bears out there will be sadly mistaken once they come to find out this is a reaction to increased selling after a three month fall off.

Why is real estate our best hope?

Confidence is shattered within the U.S stock market as economic growth seems to be stagnant; most investors are looking for new outlets to increase ROI such as commodities, i.e. gold, silver and platinum even after the spring dive in the gold market. Moody's investor services has recently considered a downgrade for the top 6 U.S banks, including J.P Morgan (NYSE:JPM), Goldman Sachs Group Inc. (NYSE:GS), Wells Fargo & Co. (NYSE:WFC), Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) as federal policies are cracking down on reviews due to the Dodd-Frank act of 2010. The more distressed major banks become, this results in red flags for mortgage companies; this will negatively impact house ownership within the U.S.

Though house ownership is in decline as of August reports, apartments are increasing in popularity. American Investment & Management will be one of the spotlight victors coming out of the housing recession. With increasing student loan debt and job demand stagnantly rising, there is no better solution than affordable housing for families as well as recent graduates. On top of all of the previously stated reasons for apartment community growth, there will be an even larger decline in home ownership within the U.S as interest rates continue to rise. Companies like American Investment & Management will thrive through the next 9 months. The entire real-estate index will consist of the safest and most consistent trends in the next five years.

As we all know real-estate hit new lows during the recession, with housing reports shifting from positive to negative monthly, they will continue to trend positive annually. When considering the current REIT market you must factor in all companies and avenues being perused such as niche properties that appeal to those down-sizing under debt pressure. Currently investors have already taken a liking to real-estate for battling with inflation rates. It's hard to trust what bit us all in the past but our future will continue to move forward and so will this market in grand fashion.

Psychology's inaccuracy

Psychologically, investors will read this article with shrewd review; everyone wants to believe in a once retired athlete but is always disappointed. Fortunately for sports viewers, stocks do not correlate with ESPN. Keep your eyes on American Investment & Management, Mid-America Apartment Communities Inc (NYSE:MAA), Camden Property Trust (NYSE:CPT), and Realty Income Corporation (NYSE:O), as they will provide strong growth for the next nine months extending up to 5 years. The estimated growth for the above REITs' average 7.74%, this does not include their average dividend growth of .08% annually. I believe the estimates to be very low and would expect growth to average around 15.65%, using sales growth Q/Q, EPS next 5 years, RSI (Q/Q x ESP next 5 / RSI = Median average (7.91% + current median average)).

REITs recreating investor confidence within the U.S

Taking into account all of the economic pressure presently occurring, things are starting to shape up. Optimism when correctly used can win any long-term battle. As REITs increase their momentum annually we will find our outlet into a stronger economy. We are currently rebuilding for the sake of the economy. After all creditor inflation of the last twenty five years is no one's fault but our own, don't blame real-estate. Finding your comfort zone within this market is challenging, everyone is biting their nails expecting the next great fall. Sometimes it pays to be on the other side of the line when planning out your future. Keep your margins in check and use with caution and you'll make it out just fine. We are all taking the plunge no matter the security purchased. World markets are in no better shape, everyone is feeling the U.S economic recession, federal policies and of course the Dodd-Frank act. We all need to stand strong and present our faith in our own governed markets and prepare for a bright future.

Disclosure: I am long AIV, O, BAC.

Business relationship disclosure: The article has been written by an Analyst at New World Volatility Research, New World Volatility Research is not receiving compensation for it (other than from Seeking Alpha). New World Volatility Research has no business relationship with any company whose stock is mentioned in this article. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the company's SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.