Seeking Alpha
Profile| Send Message|
( followers)

The stock market correction has taken down most stocks, and this has created many new bargains. One sector that has been hit particularly hard, is real estate investment trusts (REITs).

This sector is full of companies that are sensitive to the economy. Some REIT stocks have investments in commercial real estate, some own shopping centers, some are invested in hotels. All of these investments could be impacted by a severe downturn in the economy.

It certainly looks like the economy is slowing down and consumer confidence has weakened, so a soft patch is probably coming. However, some of these stocks have fallen to levels that might be considered an overreaction. A recession is typically considered to be about two quarters of negative economic growth. If the economy does not decline that much in the next couple of quarters, the stocks below are probably already too low, and could double by the end of 2013. (As with any investment, especially ones that are trending down it makes sense to buy on dips and in stages, to average in):

RAIT Financial Trust (NYSE:RAS) shares are trading at $3.60. RAIT is a real estate investment trust, based in Pennsylvania. These shares have traded in a range between $3.12 to $11.34 in the last 52 weeks. The 50-day moving average is $4.92 and the 200-day moving average is $6.66. The stock trades at a significant discount to the book value which is currently stated at $24.57. RAIT focuses on commercial real estate which is healthier than the residential market and would probably be first to really rebound. A dividend of 24 cents per year is paid which is equivalent to a 7% yield.

Felcor Lodging Trust (NYSE:FCH), is trading around $2.76. Felcor is based in Texas and invests primarily in hotel properties. These shares have traded in a range between $3.91 to $8.31 in the last 52 weeks. The 50-day moving average is $4.18 and the 200-day moving average is $6.01. FCH is estimated to earn about 19 cents per share in 2011 and 41 cents for 2012. The book value is about $1.27 per share. Because this stock does not pay a dividend and has higher debt ratios, it is not my first choice, but if it drops further, it might move up the list.

Sunstone Hotel Investors, Inc. (NYSE:SHO), is trading around $5.66. Sunstone is based in California and invests primarily in upscale hotel properties. These shares have traded in a range between $4.98 to $11.15 in the last 52 weeks. The 50-day moving average is $7.60 and the 200-day moving average is $9.41. The book value is stated at $8.51. Room rates have been rising for hotels along with occupancy rates, but there are new fears that a recession could change that quickly and that is causing the stock to trend lower. If this stock drops back down to $5 or less, I will be buying.

Ashford Hospitality Trust (NYSE:AHT) is trading around $7.48. Ashford is a real estate investment trust (REIT) company, based in Texas. These shares have traded in a range between $6.80 to $14.32 in the last 52 weeks. The 50-day moving average is $9.91 and the 200-day moving average is $10.65. AHT is estimated to earn about $1.98 per share in 2011 and $2.06 for 2012. The book value is stated at $13.84. The dividend payout is 40 cents per share which is equivalent to a 5.5% yield. This REIT focuses on hotels and a recession would reduce hotel revenues and impact AHT. This stock dropped to about $7 and at that level it looks like a good buy and a possible double to $14 in the next couple of years.

Starwood Property Trust (NYSE:STWD) is trading around $18. Starwood is a real estate investment trust company based in Connecticut. These shares have traded in a range between $16.58 to $23.67 in the last 52 weeks. The 50-day moving average is $19.17 and the 200-day moving average is $20.54. The dividend payout is $1.76 per share which is equivalent to a 10% yield. This REIT focuses on commercial mortgages. I would consider buying this at around $17 or less.

Pebblebrook Hotel Trust (NYSE:PEB), is trading around $14.97. Pebblebrook is based in Maryland and invests primarily in hotel properties. These shares have traded in a range between $14.10 to $22.47 in the last 52 weeks. The 50-day moving average is $17.73 and the 200-day moving average is $19.89. The book value is stated at $17.25. PEB pays a dividend of 48 cents per share which is equivalent to a 3.2% yield. PEB is estimated to earn about 92 cents per share in 2011 and $1.34 for 2012.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SHO, RAS over the next 72 hours.

Disclaimer: The data is sourced from Yahoo Finance and Insidercow.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.

Source: 6 Oversold REITs Poised To Double By 2013