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2 REIT Investments To 'Load Up' Before The Recovery

Aug. 04, 2022 8:05 AM ETFRT, STAG, VGSIX, VGSLX, VGSNX, VNQ55 Comments


  • REITs dropped due to fears of rising interest rates.
  • But REITs are now recovering as interest rates appear to have peaked.
  • We highlight 2 Top Picks to load up before the recovery.
  • Looking for a portfolio of ideas like this one? Members of High Yield Landlord get exclusive access to our model portfolio. Learn More »

phrase buy the dip handwritten on night wet window glass surface


The market has been recovering over the past few days.

The S&P 500 (SPY) is up 12.4% from its lows. REITs (VNQ) are slightly more than that at 13.7% and tech stocks (QQQ) are

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This article was written by

Jussi Askola, CFA profile picture

Jussi Askola is the President of Leonberg Capital, a value-oriented investment boutique that consults hedge funds, family offices, and private equity firms on REIT investing. He has authored award-winning academic papers on REIT investing, has passed all three CFA exams, and has built relationships with many top REIT executives.

He is the leader of the investing group High Yield Landlord, where he shares his real-money REIT portfolio and transactions in real-time. Features of the group include: three portfolios (core, retirement, international), buy/sell alerts, and a chat room with direct access to Jussi and his team of analysts to ask questions. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of STAG; FRT either through stock ownership, options, or other derivatives. 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.

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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Comments (55)

Jussi Askola, CFA profile picture

Thank you for reading! I hope you enjoyed the article. Let me know if you have any questions.

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If I can help with anything, let me know.

STAG share price has sure been taking it on the chin so far this year, but look for things to pick up in the months ahead. Continuing to hold.

Retired income investor
Jussi Askola, CFA profile picture
@usiah Yes, it is a good time to accumulate
Regarding FRT. Fortress balance does not equal BBB+ bond rating
Jussi Askola, CFA profile picture
@ejmanuel Yes, it does. FRT has a fortress balance sheet. It is not about its credit rating. But its asset quality coupled with its low debt and well-laddered maturities.
the problem with both of these stocks is their anemic dividend growth. they both talk a good game about top line growth and growing assets but it never seems to make it to the bottom line, or the dividend. Thanks, but I'll pass on both. Too many other, better opportunities out there right now
WynnGoggins profile picture
FRT was at $100 15 years ago. Doesn’t seem like a great investment. More like a medium term bond.
Jussi Askola, CFA profile picture
@WynnGoggins FRT has been a strong outperformer in the long run. See the chart in the article
EPRT & STOR for me.
birder profile picture
I agree with you on FRT and STAG. I own them both but about twice as much STAG and FRT.
In a recession, people will still need to go to a hospital. MPW the largest hospital Reit , is selling close to its fifty two week low, with a seven percent yield. Two of the largest authors on SA, by the amount of followers, recommend MPW. Full disclosure, bought MPW yesterday.
Jussi Askola, CFA profile picture
@bengraved We like MPW as well at these prices
@Jussi Askola My understanding is that the link between MPW and Steward Health System is a key concern. The FTC just shot down a merger between Steward and HCA in Arizona. The Steward hospitals also tend to be a bit smaller and/or less concentrated in some markets as they compete with some very large and prestigious health systems. Further, hospitals are facing an acute shortage of nurses in the wake of COVID where labor costs are rising way beyond Medicare rate increases. For the last quarter, the hospital industry as a whole experienced significant financial declines and losses as noted by bond analysts and agencies. I would be very careful here about the outlook going forward where the hospital industry continues to consolidate and there will be winners and losers.
@MrSlate For example, Steward has some community hospitals in Texas, but as a patient, you may prefer the Baylor Scott and White Health System, MD Anderson Cancer ranked #1 in the nation by US News and/ the Memorial Hermann Health System based in Houston. Good luck competing in their markets on in key subspecialty care services.
Thanks for these solid recommendations. I just want to add that you might want to check out Jim Cramer’s Mad Money interview last night with the FRT CEO, which I found pretty illuminating. The CEO discussed the impact of residential components on these properties, who use nearby restaurants and shops and often host visits with friends and family members who enjoy the these features too. He also described his sacred commitment to investors and always paying the dividend under ant circumstances. It was a very impressive presentation and made me want to buy the stock. Again, google the interview that you may enjoy. Best Wishes!
@MrSlate FRT was also Morningstar’s one of Morningstar’s reit analyst’s two top picks among Reits in the Spring.
Jussi Askola, CFA profile picture
@MrSlate Yes the residential component is something that many ignore
The Quant Investor profile picture
They'll continue to drop as interest rates rise as the low yields have bond-like characteristics. I'm in no rush to buy these.
Jussi Askola, CFA profile picture
@The Quant Investor No that is a big misconception. REITs have historically outperformed during times of rising rates.
Recovery over the past few days...? That's not a recovery. All bear markets have rallies. The trend is pointing down, and the economic data is pointing down. That being said, I do agree with a starter position in STAG. I wouldn't call it a generational buy, but its price is a bit more reasonable now.
Jussi Askola, CFA profile picture
@braticus It is impossible to make such predictions
@Jussi Askola It's an assessment based on data and trends. Also, you've made plenty of predictions in your articles. You're the guy who was touting the 'transitory' train last year, so much for that prediction.
Jussi Askola, CFA profile picture
@braticus Once again, short term market predictions are impossible to make. I never make such
BM Cashflow Detective profile picture
Valueation inversion is an essential part of the compound interest effect.

I'm long $STAG

STAG Industrial is therefore part of my portfolio with compounding effects.

The eighth cash flow wonder of the world.
BM Cashflow Detective profile picture
@Jussi Askola

Thanks too for the article.

You can only do good work if you totally identify with your idea and its implementation.

Everyone then benefits from the result. :-))
dundey profile picture
Like them both but relatively low yields for reits.
You are already talking about a recovery when we haven’t even fallen yet. What the hell is going on in this world
Jussi Askola, CFA profile picture
@omarakthar REIT share prices are up significant over the past weeks in case you missed it
I was hoping federal realty owned the super nice mall near me, that we go to all the time. It looks like the pictures you posted. I looked it up.

Nope! They own the really dumpy mall next door with the men's warehouse, planet fitness and liquor store, sandwiched between two highways. Whoops. "Walkable", "Attractive", or "Destination" would not be adjectives deployed frequently by the denizens of this plaza.

Guess u can't win em all. :P
@wboz HA! Perhaps this creates a new “walkable” synergy where you can walk on a treadmill while wearing a suit and drinking beer?
Please identify Mall and location. Was nice mall owned by SOG or MAC? Thanks from Baja OK.
@Dividend Digging Armadillo too much personal info re location. It doesn't matter; federal owns plenty of great properties so a single dingy one doesn't count for anything. (It's a BUSY strip mall, so I bet they're doing fine with rent even if the appearance is rough).

The nice mall is owned by a private development group in Boston. WS development. Their 100+ property riches are lining someone's pockets but not mine :P
Charles St profile picture
Before the recovery? Hope you packed a lunch.
As with nearly all REITs, these two are down YTD because of macro uncertainty. It’s nothing company specific. Just inflation and interest rates. While inflation is helpful to the underlying businesses, to many investors these stocks are just dividend payers and when interest rates rise, it creates uncertainty as to how to value dividend payers.

But there is always a point when shifting interest rates elicit an overreaction, creating buying opportunities in many income stocks. And I think that’s where we find ourselves.
Before the 2024 recovery? ;)
FRT assets are not only in higher income areas, but they are also walkable, at least when compared to most US REITs.

This is a big plus as consumers will provide more revenue per sqft than automobiles. Also, the families without 3 or more cars usually have more left to spend.
STAG nice REIT but poor dividend growth rate, therefore in my opinion needs to drop another 5 - 10% before I would consider buying.
Jussi Askola, CFA profile picture
@kshallcross The past is not reflective of the future. The organic growth is the fastest ever
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