Spirit Was Once An 'Ugly Duckling' And Could Soon Become A SWAN

Summary

• One of the reasons that I am personally overweight Net Lease REITs is because I believe this is where you can find the best value.
• But not all Net Lease REITs have performed as well over the years.
• Spirit needs a few quarters before I am ready for the SWAN upgrade, but I am convinced the shares are worthy of my Strong Buy recommendation.

When building a REIT portfolio, it’s important to analyze each property sector to determine the best companies to own within each category. That’s why we decided to incorporate a property sector guide that allows readers to easily find the best individual REITs to own and determine a thoughtful allocation strategy.

One of my favorite property sectors is the Net Lease sector, and in the upcoming edition of the Forbes Real Estate Investor, we plan to focus specifically on that sector and provide our “Rhino ratings” to all of these REITs.

One of the reasons that I am personally overweight Net Lease REITs is because I believe this is where you can find the best value. There is no other property category that provides investors with the most predictable and stable dividend income, and the last recession proved that point.

There are only nine REITs in existence that increased their dividend in 2009, and one-third of these are Net Lease REITs: Realty Income (O), National Retail Properties (NNN), and W.P. Carey (WPC). If you count the Net Lease healthcare REITs - LTC Properties (LTC) and National Health Care (NHI) - there were five REITs that made it through the worst financial collapse since the Great Depression.

In addition, Berkshire Hathaway (BRK.A, BRK.B) is also bullish in the Net Lease REIT sector. Just over a year ago (last June), Buffett’s investment company picked up a 9.8% interest in STOR for around $377 million. STOR simultaneously issued 18.6 million shares of company stock in a private placement at a price of $20.25 per share.

As you can see, the “Buffett Bounce” illustrates the demand for Net Lease investments as Berkshire Hathaway’s wise allocation to the space. I will add that I was ahead of the “Buffet Bounce” by around two weeks as I upgraded shares from a BUY to

Analyst’s Disclosure: I am/we are long ACC, AVB, BHR, BPY, BRX, BXMT, CCI, CHCT, CIO, CLDT, CONE, CORR, CTRE, CUBE, DEA, DLR, DOC, EPR, EQIX, EXR, FRT, GEO, GMRE, GPT, HASI, HT, HTA, INN, IRET, IRM, JCAP, KIM, KREF, KRG, LADR, LAND, LMRK, LTC, MNR, NNN, NXRT, O, OFC, OHI, OUT, PEB, PEI, PK, PSB, PTTTS, QTS, REG, RHP, ROIC, SBRA, SKT, SPG, SRC, STAG, STOR, TCO, TRTX, UBA, UMH, UNIT, VER, VICI, VNO, VNQ, VTR, WPC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.