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The State Of REITs: January 2020 Edition



  • The average REIT had a positive monthly total return in 10 of the 12 months of 2019, including a +0.29% return in December.
  • Micro cap REITs (+39.7%) significantly outperformed their larger peers in 2019.
  • The vast majority of REIT securities (92.31%) achieved positive total returns in 2019.
  • Land and Single Family Housing REITs led all property types in 2019, while Malls and Corrections badly underperformed.
  • As we enter 2020, 88% of large cap REITs trade at a Price/FFO premium to the average small cap REIT.

Subscribers to the 2MC Retirement Income Solutions Marketplace received early access to this report.

REIT Performance

December was a very good month for the broader stock market, but less so for the REIT sector, which saw only a modest gain (+0.29%). The average equity REIT achieved an excellent total return of 28.84% in 2019, experiencing gains in 10 of the 12 months. For the 2nd month in a row, the REIT sector lagged the NASDAQ (+3.54%), S&P 500 (+2.86%) and Dow Jones Industrial Average (+1.74%). In 2019, the total return of REITs (+28.84%) fell short of the NASDAQ (+35.22%), performed in line with the S&P 500 (+28.88%) and outperformed the Dow (+22.34%). The market cap weighted Vanguard Real Estate ETF (VNQ) underperformed the average REIT yet again in December (-0.30% vs. +0.29%), finishing the year 132 basis points shy of the average REIT (+27.52% vs. +28.84%). The spread between the 2020 FFO multiples of large cap REITs (20.4x) and small cap REITs (15.4x) narrowed in December as multiples held steady for large cap REITs, but rose 1 turn for small caps. In this monthly publication, I will provide REIT data on numerous metrics to help readers identify which property types and individual securities currently offer the best opportunities to achieve their investment goals.

Source: Graph by Simon Bowler of 2nd Market Capital, Data compiled from SNL.com. See important notes and disclosures at the end of this article.

Small cap REITs (-0.65%) underperformed in December, but still managed to achieve a strong 29.96% total return in 2019. Mid cap REITs were the top performers in December (1.05% vs. +0.29%), but finished the year behind their peers (+25.64% vs. 28.84%). Micro cap REITs continued to outperform their larger peers in December (+1% vs. +0.29%), finishing 2019 with a stellar 39.70% and outpacing large caps by 10.87%.

This article was written by

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Simon Bowler is the Chief Communications Officer at 2nd Market Capital Advisory Corporation (2MCAC).  2MCAC specializes in the analysis and trading of real estate securities. Through a selective process and consideration of market dynamics, we aim to construct portfolios for rising streams of dividend income and capital appreciation.Our Portfolio Income Solutions Marketplace service provides stock picks, extensive analysis and data sheets to help enhance the returns of do-it-yourself investors.Investment Advisory Services
We now offer a way to directly invest in our Proprietary Investment Portfolio Strategy via REIT Total Return, which replicates our activity in client accounts. Total Return client’s brokerage accounts are automatically invested simultaneously and at the same price when we make a trade in the REIT Total Return Portfolio (also known as 2CHYP).
Learn more about our REIT Total Return Portfolio.Simon Bowler, along with fellow SA contributors Dane Bowler and Ross Bowler, is an investment advisory representative of 2nd Market Capital Advisory Corporation (2MCAC), a state-registered investment advisor.Full Disclosure. All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of the specific person. Please see our SA Disclosure Statement for our Full Disclaimer.

Analyst’s Disclosure: I am/we are long CBL, CXW, GEO, UNIT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

2nd Market Capital and its affiliated accounts are long CBL, CXW, GEO and UNIT. I am personally long CBL, CXW, GEO and UNIT. This article is provided for informational purposes only. It is not a recommendation to buy or sell any security and is strictly the opinion of the writer. Information contained in this article is impersonal and not tailored to the investment needs of any particular person. It does not constitute a recommendation that any particular security or strategy is suitable for a specific person. Investing in publicly held securities is speculative and involves risk, including the possible loss of principal. The reader must determine whether any investment is suitable and accepts responsibility for their investment decisions. Simon Bowler is an investment advisor representative of 2MCAC, a Wisconsin registered investment advisor. Positive comments made by others should not be construed as an endorsement of the writer's abilities as an investment advisor representative. Commentary may contain forward looking statements which are by definition uncertain. Actual results may differ materially from our forecasts or estimations, and 2MCAC and its affiliates cannot be held liable for the use of and reliance upon the opinions, estimates, forecasts and findings in this article. Although the statements of fact and data in this report have been obtained from sources believed to be reliable, 2MCAC does not guarantee their accuracy and assumes no liability or responsibility for any omissions/errors.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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