In this article, we will take a look at the current dynamics of US real estate while covering the 10 Best Real Estate and Realty Stocks To Buy According to Hedge Funds.
US Real Estate: A Market Stuck for Too Long
Soaring mortgage rates and sky-high home prices have pushed American homebuyers out of the market for long. The situation seems demoralizing as economists at Bank of America expected the market to remain stuck until 2026 or even longer. Home prices are expected to rise by 4.5% in 2024 and then by another 5% in 2025. A critical issue hurting first-time buyers is the rate lock-in effect, the effect due to which existing homeowners remain unwilling to sell their houses since they will have to pay a higher mortgage on a new home. While this effect has restricted the supply of homes in the market, it might persist for another 6 to 8 years. In such conditions, the divide between have and have nots has amplified since current homeowners have more financial flexibility while a large proportion can simply not afford to own a house.
Long Awaited Fed Rate Cuts: What Can We Expect?
With mortgage rates currently dropping to their lowest since May 2023, the mortgage demand from both homebuyers and homeowners surged as the applications to refinance a home loan climbed. The housing industry has its eyes on the interest rate cut which had been signaled by the Fed to take place in September. Some experts believe that it could ease the affordability concerns of homebuyers in the short run. However, the cut has been expected to be rather small than replicating the historically low rates during the pandemic. On the contrary, Nick Villa, a Moody’s economist, is of the opinion that the rate cut is unlikely to solve the housing crisis although a lower mortgage rate might offer some relief. Even after the rate cut, homebuyers will have to be patient with the limited housing supply which continues to be the core and unaddressed problem in the market.
It is important to consider the Fed’s rate impact on homebuilders as well. Evercore ISI head of housing research, Stephen Kim, in an interview with CNBC, shed light on how the currently dropping rates have set homebuilders for a nice fall which will witness a rebound in demand. He pointed out the same short supply dilemma where the US has 3.8 months of supply of resale homes on the market which used to be 5 to 6 months, normally. Under these circumstances, he expects a really tight market with low pressure on home prices. While the Fed actually cutting rates might not have a huge impact on mortgage rates, it will drive the would-be homebuyers out of their places to look for a home. In conclusion, the future of the US housing market seems promising for homebuilders while homebuyers might be subject to temporary gratification since the interest rate cut won’t make that much of an impact on the mortgage rate and on a market deeply plagued with the unavailability of houses.
With this context, let’s discuss the 10 best real estate and realty stocks to buy according to hedge funds.
Aerial view of a portfolio of retail properties, depicting the company’s real estate investments.
Our Methodology:
In order to compile a list of the 10 best real estate and realty stocks to buy according to hedge funds, we first use a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best real estate and realty stocks to buy according to hedge funds have been arranged in ascending order of the number of hedge funds that have stakes in them, as of Q1 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Real Estate and Realty Stocks To Buy According to Hedge Funds
10. Public Storage (NYSE:PSA)
Number of Hedge Fund Holders: 36
Public Storage (NYSE:PSA) is an owner, operator, and developer of self-storage facilities. The company opened its first self-storage facility in 1972 and has become the largest owner and operator of self-storage facilities globally. It also serves as one of the biggest landlords across the world with more than 170 million net rentable square feet of real estate.
Clearly, Public Storage (NYSE:PSA) is a leader in the self-storage industry. With 51 years in operation, 3,369 properties, $4.5 billion in 2023 revenues, and thousands of locations across the US and Europe, the company has a significant place in the industry. With half of the U.S. population residing within a Public Storage trade area, the firm has an unmatched owned scale and locations as its competitive advantage. The income growth profile also outpaces the wider real estate space. While high-growth lease-up properties now account for 22% of the total portfolio, the company has accelerated external growth for itself.
Since the beginning of 2019, the firm’s portfolio size has expanded by 35% through $11 billion of investment and an addition of 56 million square feet. Resilient income generation, a growth-oriented balance sheet, and the potential for robust external growth make Public Storage (NYSE:PSA) an iconic brand with consumer recognition. Public Storage (NYSE:PSA) ranks 10th among the best real estate and realty stocks to buy now.
9. Welltower Inc. (NYSE:WELL)
Number of Hedge Fund Holders: 36
Welltower Inc. (NYSE:WELL) is known for delivering healthcare infrastructure by providing real estate capital to leading seniors housing operators, post-acute care providers, and health systems. The company was incorporated as a healthcare REIT in 1985 and has a history of over 40 years of investing in health care. It owns interests in seniors housing and post-acute communities, and outpatient medical properties concentrated in high-growth markets in the US, Canada, and the United Kingdom.
The company relationship network and premier-quality healthcare real estate portfolio have made it quite popular. Welltower Inc. (NYSE:WELL) has a major focus on seniors housing which is rather needs-based and is a domain that highly aligns with external market conditions. An accelerating 80+ population growth in the US is a theme expected to persist in the coming years. The company is set to benefit from the strong demand for senior housing. With construction starts not being enough to cater to this demand implying a diminishing new supply, Welltower Inc. (NYSE:WELL) is in a good position to sustain its occupancy growth in 2024. The company expects an extended period of compounding cash flow and revenue growth driven by this trend.
Although the firm’s revenue for the second quarter slightly dipped by 2% from the last quarter, the revenue has improved year-over-year. It has also updated its outlook for 2024 funds from operations (FFO) to fall between $4.13 and $4.21 per share rather than the previous range of $4.05 to $4.17 per share. In this quarter alone, income from senior housing climbed 21.7%.
The leading position in health care infrastructure and changing demographics bringing in a strong momentum for growth deems Welltower Inc. (NYSE:WELL) a good investment. The stock was held by 36 hedge funds as of March 31. WELL is one of the best real estate and realty stocks to buy now.
8. Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 37
Digital Realty Trust, Inc. (NYSE:DLR) is a real estate investment trust which was incorporated in Maryland in March 2004 and owns, operates, and invests in carrier-neutral data centers. The company delivers the full spectrum of data center, colocation, and interconnection solutions. These flexible, secure, and scalable data center solutions are meant to support enterprises and service providers and to meet critical infrastructure needs. The firm was incorporated in Maryland in March 2004.
The REIT’s leading data center platform capitalizes on the growing global demand from a diversified customer base. It has a global footprint with local expertise and connectivity to the locations that matter most with more than 300 data centers across over 25 countries and over 50 global metros. As of March 31, the company serves as the 7th largest publicly traded REIT in the United States which has an enterprise value of $64 billion and has witnessed 20 years of consecutive revenue growth. Since the company’s focus is on data centers, digital transformation is expected to drive strong demand.
The strength of demand for data center capacity can be seen in the second quarter results of Digital Realty Trust, Inc. (NYSE:DLR). With $164 million of new leasing executed in this quarter along with the last quarter’s record leasing, the REIT witnessed a record first half of the year. With record new log-ins and near-record bookings in each of the zero-to-one-megawatt and interconnection categories, the company also recorded one of the strongest quarters ever in the zero-to-one-megawatt plus interconnection segment.
Digital Realty Trust, Inc. (NYSE:DLR) remains well-positioned to take advantage of the demand for data center capacity especially for larger capacity blocks in its core markets. The firm expects to accelerate top-line and bottom-line growth for the remainder of 2024 which is a positive sign. As of March 31, the stock was held by 37 hedge funds which ranks it in 8th position on our list of the best real estate stocks to buy now.
7. VICI Properties Inc. (NYSE:VICI)
Number of Hedge Fund Holders: 38
VICI Properties Inc. (NYSE:VICI) is one of the largest owners of gaming, hospitality, and entertainment destinations in the United States. The company owns 93 experiential assets across a diverse portfolio which comprises 54 gaming properties, 39 other experiential properties, and four championship golf courses positioned across the US and Canada. Under triple-net lease agreements, its properties are occupied by gaming, leisure, and hospitality operators. The company’s strategy involves partnering with quality experiential place makers and operators to create the highest quality experiential real estate portfolio.
VICI Properties Inc. (NYSE:VICI) was formed in 2017 as a spin-off from Caesars Entertainment Corporation. Since the company started off with a focus on one property type which is casinos, some pessimists do not see it as diversified. This property type remains more vulnerable to the macro environment as in the case of lockdowns during the pandemic. However, what’s important to notice is that this focus has worked so far since the company has delivered increasing dividends to its shareholders since its initial public offering in 2018. The company’s net-lease business model has also been resilient during the COVID times.
With that being said, diversification is fundamental to the company’s long-term growth and this is what the management has recently been striving for. Back in December, the firm announced the acquisition of the leasehold interest of Chelsea Piers, the premier sports and entertainment complex in New York City. Another of its major investments apart from casinos was the acquisition of the real estate assets of 38 bowling entertainment centers from Bowlero, one of the largest operators of bowling centers in North America.
Considering how VICI Properties Inc. (NYSE:VICI) has so far generated value for investors, its future potential, and current efforts to diversify the core focus, it is one of the best real estate stocks to buy now. As of March 31, the company had 38 hedge fund holders.
6. Avalonbay Communities, Inc. (NYSE:AVB)
Number of Hedge Fund Holders: 42
Avalonbay Communities, Inc. (NYSE:AVB) is a multifamily REIT that develops, redevelops, acquires, and manages apartment homes in some of the top markets across 12 US states and Washington, DC. The company focuses on metropolitan areas with vibrant quality of life, low housing affordability, and strong employment growth.
With a solid market capitalization of $29.71 billion and a net income margin of 29.41% exceeding the industry average, the firm occupies a strong presence in the multifamily housing sector. The company owns a well-established portfolio of 281 apartment communities with more than 87,000 units. This portfolio is focused on coastal markets that have delivered solid same-store net operating income (NOI) growth. Although the firm faced a setback during the pandemic when people chose rural and suburban areas over cities, it has been resilient. Speaking of now, the second quarter of 2024 marked turnover well below historical levels which supported healthy occupancy for the REIT.
During the year’s second quarter, Avalonbay Communities was successful in beating revenue expectations. The company heavily favored from market conditions such as the strong inclination towards renting rather than buying a home and the low new supply in the firm’s suburban coastal markets. The company’s development activity remains robust as it completed the development of 3 communities comprising 901 apartment homes during the three months ended June 30. It also had 17 consolidated Development communities under construction which will contain 6,066 apartment homes and 65,000 square feet of commercial space which shows the drive for growth in the future.
Avalonbay Communities, Inc. (NYSE:AVB) ranks among the 10 best real estate and realty stocks according to hedge funds. The coastal-focused portfolio and superior competitive position among other multifamily residential REITs make the company a good option to be considered.
5. Crown Castle Inc. (NYSE:CCI)
Number of Hedge Fund Holders: 43
Crown Castle Inc. (NYSE:CCI) serves as the largest provider of communications infrastructure in the United States. The company has an experience of 30 years of owning and operating network assets. It was founded in 1994 with an initial portfolio of 133 cell towers. In 1998, it went public with approximately 1,400 towers. Crown Castle now offers a nationwide footprint of towers, small cells, and fiber to help businesses and organizations connect to technologies and innovations.
The REIT has a presence in every major US market through over 40,000 cell towers, 115,000 on-air or under-contract small cell nodes, and 90,000 route miles of fiber. The company is rightly positioned to capitalize on the growing demand for data in the United States and claims to have a strong trajectory with growth opportunities for the years to follow. It is set to benefit from the long-term US wireless data demand growth. The company is meant to offer the US wireless carriers the prime real estate they require to run their networks. For tailwinds such as 5G and the Internet of Things which are to stay, the firm’s infrastructure solutions are crucial.
Some of the bitter circumstances that have impacted the company’s financial performance in 2023 include higher interest rates and Sprint canceling its cell tower leases with the firm. However, its results for the second quarter results showed solid operating and financial performance in all of its businesses and reiterated its full-year 2024 outlook. While the firm believes that there is a demand to grow small cell business revenues by double digits over the next few years, the fiber solutions business delivered growth above its 3% expectation.
Crown Castle Inc. (NYSE:CCI) seems attractive with its unique network of communications infrastructure, the performance of its underlying business, and the level of growth achieved by its businesses. As of March 31, the stock was held by 43 hedge funds thereby ranking it on our list.
4. Prologis, Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 48
Prologis, Inc. (NYSE:PLD) operates as the global leader in logistics real estate which tends to focus on high-barrier, high-growth markets. The company’s real estate offerings include gateway and multimarket properties, Last Touch® distribution centers, and city distribution property buildings. It also leases modern logistics facilities to 6,700 customers spread across the business-to-business and retail/online fulfillment categories. The company claims that 2.8% of the global GDP flows through its distribution centers globally.
Prologis, Inc. (NYSE:PLD) has a leading position in industrial real estate. The firm’s irreplaceable portfolio makes it unique. As of June 30, Prologis, Inc. (NYSE:PLD) owned or had investments in, on a wholly owned basis or through co-investment ventures, properties, and development projects amounting to nearly 1.2 billion square feet in 19 countries. The top retail, e-commerce, and logistics companies prefer the firm as their real estate partner including Amazon, FedEx, DHL, and Maersk.
Over the past 3 years, the company’s bottom line has grown by 19.18% while its top line has expanded by 22.10%. With dominance in the industry, strong potential for growth, and a market capitalization of $110 billion making it one of the largest publicly traded real estate investment trusts, Prologis, Inc. (NYSE:PLD) ranks among the 10 best real estate and realty stocks to buy according to hedge funds. As of March 31, the stock was held by 48 hedge funds.
3. CBRE Group, Inc. (NYSE:CBRE)
Number of Hedge Fund Holders: 54
CBRE Group, Inc. (NYSE:CBRE) is a commercial real estate services and investment firm headquartered in Dallas, Texas. The firm operates across every dimension of commercial real estate and claims to have the leading global market position in leasing, property sales, outsourcing, property management, and valuation. With an employee base of over 130,000, the company serves clients in over 100 countries across the globe. These clients are served through three business segments including REI (real estate investments), advisory services, and GWS (global workplace solutions).
CBRE Group, Inc. (NYSE:CBRE) has the privilege to serve as the largest commercial property developer in the United States with $148 billion of assets under management within its Investment Management business. As of March 2023, the firm revealed a 53% market share as compared to 47% going to its peers. This market-leading competitive position is what makes the firm stand out from the competition. The highly resilient business lines and sufficient investment capacity are further driving forces for long-term growth.
During the last fiscal quarter, each of the three business segments outperformed expectations for both net revenue and segment operating profits. While the GWS (global workplace solutions) and Advisory segments together delivered double-digit net revenue growth for the first time in 18 months, the REI segment witnessed an upturn in activity and is contracting to sell development assets at good valuations as expected to complete in the fourth quarter.
As aforementioned, CBRE Group, Inc. (NYSE:CBRE) is in a strong leadership position in a growing industry. The stock is currently trading at 23 times its forward earnings, a discount of 36% to the sector. As of March 31, the company was held by 54 hedge funds. Thus, CBRE Group is a top real estate stock to buy.
2. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 56
American Tower Corporation (NYSE:AMT) serves as one of the largest global real estate investment trusts. The company was founded in 1995 as an American Radio subsidiary and currently offers services and solutions to deploy and support wireless networks in 25 countries across six continents. It has a portfolio of independently owned U.S. and international tower real estate and a network of data centers in America. The company serves mobile network operators, multinational telecommunications companies, media and broadband providers, and government agencies.
American Tower Corporation has the kind of portfolio that has resulted in a footprint across diverse geographies. The ongoing exponential growth in mobile data consumption has driven performance in the United States. The company’s current financial performance is backed up by the strong underlying demand for its portfolio of communications assets. Its synergy revolves around having that global expertise and experience which enables it to navigate operational risks in new markets while simultaneously creating opportunities. Since emerging markets remain more vulnerable to external risks, the company focuses on incremental investments in developed economies while expecting to reduce their relative exposure to emerging markets over time.
The stock has bright growth prospects on the horizon after the company’s demoralizing situation where its adjusted FFO declined by 2.1% in the last quarter of 2023. However, the future seems optimistic as the REIT continued its momentum for 2024 by growing its adjusted by 13.5% to $1.3 billion during the second quarter. This was backed up by over 5% Organic Tenant Billings Growth in its US & Canada segment, positive collection trends in India, and the second-highest quarter of signed new business achieved by CoreSite.
With a dividend yield of 2.76% and a 5-year dividend growth rate of 13.71%, American Tower Corporation (NYSE:AMT) is one of the best real estate stocks to buy now. The company has also managed to grow its revenue by 11.66% and its net income by 13.25% over the last decade. Furthermore, the stock is trading at 34 times its forward earnings, a 5.75% discount to the sector. As of March 31, the stock is held by 56 hedge funds.
1. Equinix Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 66
Equinix Inc. (NASDAQ:EQIX) is one of the largest digital infrastructure companies globally which specializes in in Internet connection and data centers. The REIT was formed in 1998 as a vendor-neutral multitenant data center provider. It currently serves 71 markets across 33 countries and 6 continents and enables businesses to scale across the world’s biggest network of interconnected data centers.
Equinix Inc. (NASDAQ:EQIX) has invested over $40 billion to create an unmatched global footprint of data centers. As reported by the company, its global ecosystem surpasses its next 10 competitors combined as it offers customers access to over 2,000 network services, more than 3,000 cloud and IT services, over 450 content and digital media services, and more than 4,800 enterprises. The REIT secured a solid $8.1 billion in 2023 global revenues.
The firm’s recent financial performance is definitely promising. 2024’s second quarter marked record gross bookings and its adjusted EBITDA surpassed the $1 billion quarterly threshold for the first time. Simultaneously, net income grew by 45% year-over-year. The scale and reach of its industry-leading data center services portfolio don’t end here. Equinix Inc. (NASDAQ:EQIX) has 54 major projects underway across 24 countries. Leveraging the growing digital opportunity of the fast-growing Southeast Asia region, the company has announced its entry into the Philippines while expanding into Malaysia and Indonesia
With digital infrastructure becoming crucial to delivering services globally, Equinix Inc. (NASDAQ:EQIX) has an ideal position to capitalize on the opportunities lying ahead. As of March 31, the company has held by 66 hedge funds which ranks it on the top of our 10 best real estate and realty stocks to buy according to hedge funds.
While we acknowledge the potential of Equinix Inc. (NASDAQ:EQIX) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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