In this article, we will take a look at the 10 best real estate and realty stocks to buy according to hedge funds.
Trump’s Win: Implications for Housing
As reported by Realtor, America’s newly elected president Trump has blamed illegal immigration for the country’s housing affordability crisis since these immigrants are in the race for an already short supply of homes and hence, plans to do the largest deportation operation in American history. It is important to consider that the recent post-pandemic surging home prices started off before the illegal immigration levels climbed. Furthermore, Realtor.com senior economist Ralph McLaughlin referred to this move as something that would create negative consequences for the housing market by stating:
“In the short run, reducing immigration could severely hurt the labor supply needed for new homebuilding since up to a third of residential construction employment consists of foreign-born workers”
Simultaneously, Trump wants to cut regulations and permit requirements that add unnecessary costs to new homes. Regarding this, economists believe that although reduced regulations might lower homebuilding costs, they would neither solve the entire housing crisis nor fulfill Trump’s dream of cutting the cost of a new home in half by eliminating regulations.
Where are the Mortgage Rates Heading Post-Election?
Mortgage rates are directly tied to 10-year Treasury bond yields which tend to grow with investors forecasting stronger economic growth and higher inflation. According to Mortgage News Daily, the 30-year fixed mortgage rates briefly rose, settling at 6.98% following Trump’s victory. Despite two rate cuts by the Fed, the rate has surged by almost 1% since the month of September.
Trump has also stated his enthusiasm related to somehow lowering mortgage rates, without a clear mechanism unveiled as of yet. Economists and analysts believe that the President’s economic agenda could potentially lead to a surge in mortgage rates. Trump has plans to reduce tax rates, impose tariffs on foreign goods, and ease regulations, policies that are going to lead to a rise in inflation and government debt, which is going to drive up the interest rates and mortgage rates. Before the elections, 16 Nobel Prize-winning economists agreed that Trump’s policies would fuel inflation, calling Joe Biden’s economic agenda vastly superior to Donald Trump’s.
Doug Bauer, CEO of Tri Pointe Homes, joined CNBC to discuss what’s next for the US housing market. He sees the lower corporate tax and the easing of regulations for banks as positives. With banks being encouraged to put dollars into all businesses especially the land and land development business to small and medium-sized builders, it is going to help the industry as a whole. Regarding the deportation, he believes the discussion is pretty early but his company, as a larger builder, has not faced any problems on the labor side of the equation. Finally, he mentioned that the core issue remains the supply. While a reduction in interest rates would unlock the resale market, the new homebuilding is a ‘state and local issue’ as there are a lot of regulations pulling back the land that could be utilized to build affordable housing.
Ivy Zelman, Zelman and Associates CEO, also appeared on an interview with CNBC, to reiterate Bauer’s point about the issue regarding the new home market. In her opinion, the housing market weakness is at the entry level while the move-up market remains strong and resilient despite rates moving higher. While first-time homebuyers are facing extreme affordability issues, she thinks cities and municipalities could partner with local builders to utilize land that’s not out so far in the rural areas and that the solution lies at the local government level. Trump also plans to open up federal land for building. However, a limitation of this would be a lack of federal land located near the places where people wish to work and live.
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 their hedge fund holders as of Q3.
At Insider Monkey we are obsessed with 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. AvalonBay Communities, Inc. (NYSE:AVB)
Number of Hedge Fund Holders: 35
Avalonbay Communities, Inc. (NYSE:AVB) is a leading multifamily real estate investment trust that develops, redevelops, acquires, and manages distinctive apartment homes in the best US markets across 12 states and Washington, DC. The firm owned or held a direct or indirect ownership interest in 305 apartment communities comprising 92,908 apartment homes in 12 states and the District of Columbia, as of September 30.
The firm has a leading position in the multifamily housing sector with its well-established portfolio. This portfolio is focused on coastal markets that have delivered solid same-store net operating income growth. The company has also been benefitting from market conditions such as the strong inclination towards renting rather than home buying and the low new supply in the firm’s suburban coastal markets.
For the third quarter, the firm’s Core FFO per share grew 3% year-over-year while the EPS climbed 115.7% over the year. At the same time, Same Store Residential revenue rose 3.1% year-over-year. In terms of the development activity, Avalonbay Communities, Inc. (NYSE:AVB) completed the development of two communities including Avalon Bothell Commons I and Kanso Milford. Simultaneously, the firm started the construction of four apartment communities.
9. VICI Properties Inc. (NYSE:VICI)
Number of Hedge Fund Holders: 35
VICI Properties Inc. (NYSE:VICI) is an experiential REIT that owns one of the largest portfolios of market-leading gaming, hospitality, and entertainment destinations in the US. This portfolio includes 93 experiential assets across a diverse portfolio comprising 54 gaming properties and 39 other experiential properties across the US and Canada.
VICI is one of the largest triple net lease REITs with $3.1 billion of annualized cash rent. The firm sets it apart from traditional net lease REITs with assets having high barriers to entry and high financial transparency. Since the gaming regulatory environment creates high barriers to entry, the firm benefits from a 100% occupancy rate as tenant’s ability to move locations is limited. The firm has also demonstrated growth by announcing approximately $37 billion of domestic and international investments across gaming and other experiential assets since its founding in 2017. VICI remains diversified with multiple revenue streams including hotel rooms, meeting and convention space, gaming space, entertainment venues, and retail outlets.
For the third quarter, VICI Properties Inc. (NYSE:VICI) posted a 6.7% year-over-year revenue growth while announcing its 7th consecutive annual dividend increase. AFFO attributable to common stockholders rose 8.4% year-over-year to $593.9 million.
VICI Properties Inc. (NYSE:VICI) is a world-leading gaming and experiential REIT with a significant scale and a track record of growth. As of Q3, the stock is held by 35 hedge funds.
8. Welltower Inc. (NYSE:WELL)
Number of Hedge Fund Holders: 37
Welltower Inc. (NYSE:WELL) tends to deliver health care infrastructure by providing real estate capital to leading senior housing operators, post-acute care providers, and health systems. The company was incorporated as a health care REIT in 1985. 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 UK.
The firm is known for its unmatched relationship network and premier-quality healthcare real estate portfolio. The firm has witnessed more than 40 years of exclusively investing in health care. With the current theme of accelerating 80+ population growth in the US, Welltower is 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.
For the third quarter, Welltower Inc. (NYSE:WELL) reported normalized FFO per share growth of 21% year-over-year. The Seniors Housing Operating Portfolio continues to exceed expectations, with same-store net operating income growth of 23% and a strong top-line growth of 8.9%, year-over-year. The investment activity continued at an unprecedented rate. $1.2 billion of transactions closed or under contract since Q2 earnings release, bringing year-to-date activity to $6.1 billion, the highest level in the company’s history.
The leading position in health care infrastructure and favorable long-term external dynamics deems Welltower Inc. (NYSE:WELL) a promising stock. As of Q3, the stock was held by 37 hedge funds.
7. Costar Group, Inc. (NASDAQ:CSGP)
Number of Hedge Fund Holders: 43
Costar Group, Inc. (NASDAQ:CSGP) is a leading provider of commercial and residential real estate information, analytics, and online marketplaces. The company has a strong mission of digitizing the world’s real estate.
CoStar has built an international network of over 27 internationally recognized brands through strategic acquisitions and consistent, organic growth. This network of brands attracts over 150 million unique monthly visitors. The firm’s financial model remains strong with more than 95% of subscription revenue and 90% renewal rates for contracts with 1 year or longer terms. The growth potential is also long-term since CoStar Group has an addressable market for global real estate information and marketplaces of over $100 billion.
Costar Group, Inc. (NASDAQ:CSGP) recently closed its 54th consecutive quarter of double-digit revenue growth. Revenue for the third quarter was up 11% year-over-year. Both net income and adjusted EBITDA climbed since the last quarter. The firm had a 28% increase year-over-year in average monthly unique visitors to 163 million in the third quarter of 2024. The businesses, Apartments.com and CoStar, also continue to deliver double-digit revenue growth.
The firm’s competitive edge in real estate and technology complimented by a successful network of brands and a solid material financial performance make it an attractive choice for investors. The stock is held by 43 hedge funds, as of Q3 2024.
6. Simon Property Group, Inc. (NYSE:SPG)
Number of Hedge Fund Holders: 48
Simon Property Group, Inc. (NYSE:SPG) engages in the ownership of premier shopping, dining, entertainment, and mixed-use destinations, which primarily include malls, Premium Outlets, and The Mills. As of September 30, SPG owned or held an interest in 196 income-producing properties in the US, comprising 93 malls, 70 Premium Outlets, 14 Mills, six lifestyle centers, and 13 other retail properties in 37 states and Puerto Rico. Internationally, the firm had ownership in 35 Premium Outlets and Designer Outlet properties primarily located in Asia, Europe, and Canada.
With three decades in operation, Simon Property Group, Inc. (NYSE:SPG) has demonstrated growth, resilience, and innovation in becoming the preeminent owner and operator of best-in-class retail real estate properties, with scale. Simon’s portfolio remains differentiated by product type, geography, and tenant mix. This portfolio stands unmatched as it includes properties like shopping centers, many generating $100 million or more in annual NOI. Thus, no other real estate type can match the longevity, embedded future growth, and NOI generation of these centers.
The management was pleased with the strong financial and operational performance in Q3 alongside the successful openings of Tulsa Premium Outlets and the expansion of Busan Premium Outlets. Funds From Operations (FFO) was $1.067 billion as compared to $1.201 billion in the preceding year. Domestic property NOI rose 5.4% and portfolio NOI increased 5% as compared to the prior year period.
Thus, Simon Property Group, Inc. (NYSE:SPG) is a leading REIT with its properties providing community gathering places for millions of people every day and generating billions in annual sales. The firm serves as one of the largest landlords to the world’s most important retailers. As of Q3, the stock is held by 48 hedge funds.
5. CBRE Group, Inc. (NYSE:CBRE)
Number of Hedge Fund Holders: 49
CBRE Group, Inc. (NYSE:CBRE) is one of the largest commercial real estate services and investment firms globally. The firm has a leading global market position in leasing, property sales, outsourcing, property management, and valuation. CBRE 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 US with $148 billion of assets under management within its Investment Management business. The market-leading competitive position, highly resilient business lines, and sufficient investment capacity are driving forces for the firm’s long-term growth.
For the third quarter ended September 30, CBRE Group, Inc. (NYSE:CBRE) witnessed strong results for all of its segments. Revenue for the Advisory Services segment was up 19% while revenue for the GWS segment was up 12.3%, year-over-year. Simultaneously, the REI segment saw its revenue climb 43.8% over the year. The quarterly performance marked the second-highest third-quarter core earnings per share in the company’s history.
CBRE Group, Inc. (NYSE:CBRE) works in every dimension of commercial real estate and is a global leader in a growing industry. As of Q3, the stock was held by 49 hedge funds. Thus, CBRE Group is one of the top real estate and realty stocks to buy according to hedge funds.
4. Prologis, Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 49
Prologis, Inc. (NYSE:PLD) is a global leader in logistics real estate and focuses on high-barrier, high-growth markets. The firm leases modern logistics facilities to over 6,700 customers spread across two categories, business-to-business and retail/online fulfillment.
Considering that 2.8% of the global GDP flows through its distribution centers annually, PLD has a strong global standing. The firm has a leading position in industrial real estate complimented by an irreplaceable portfolio. On September 30, Prologis owned or had investments in, on a wholly owned basis or through co-investment ventures, properties, and development projects expected to total nearly 1.2 billion square feet in 20 countries. The leading retail, e-commerce, and logistics companies including Amazon, FedEx, DHL, and Maersk prefer Prologis as their real estate partner.
PLD is in a good position as the partner of choice for leading global customers, to cater to their needs in supply chain, digital, and energy infrastructure. In Q3, Prologis, Inc. (NYSE:PLD) reported core funds from operations (Core FFO) per diluted share of $1.43, up 10.0% year-over-year. Net earnings per diluted share were $1.08 and increased 35% as compared to the prior-year period.
Therefore, Prologis, Inc. (NYSE:PLD) is a premier global logistic real estate company that boasts a global scale, expertise, and an unparalleled portfolio. As of Q3, the stock is held by 49 hedge funds.
3. Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 52
Digital Realty Trust, Inc. (NYSE:DLR) 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 tend to support enterprises and service providers and meet critical infrastructure needs. DLR was incorporated in Maryland in March 2004.
DLR’s leading data center platform leverages the growing global demand from a diversified customer base. The firm’s global data center platform enables it to deliver value and security on six continents in over 25 countries and more than 50 metro areas. As of September 30, Digital Realty Trust serves as the 7th largest publicly traded US REIT with an equity market capitalization of $55 billion.
For Q3, Digital Realty Trust, Inc. (NYSE:DLR) reported revenues of $1.4 billion, a 2% rise from the same quarter last year. Funds From Operations (FFO) was $1.55 in Q3, the same as the prior year. Leasing activity remained strong as the firm recorded over $520 million of new leasing, more than double the record set in the first quarter. In regards to investment activity, DLR closed on the acquisition of a 6.7-acre parcel in Richardson, Texas, other than the acquisition of the land and shell of one of its existing data centers in Schiphol Rijk, Amsterdam.
With embedded internal expertise as the world’s largest data center acquirer, developer, owner, and operator, Digital Realty Trust, Inc. (NYSE:DLR) is a promising stock that can benefit from the accelerating global data center demand. As of Q3, the stock is held by 52 hedge funds which ranks it 3rd on our list of the best real estate and realty stocks to buy.
2. Equinix Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 55
Equinix Inc. (NASDAQ:EQIX) is a leading data center REIT. The firm was formed in 1998 as a vendor-neutral multi-tenant 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 an unrivaled global ecosystem that surpasses its next 10 competitors combined. The firm 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. Equinix posted a solid $8.1 billion in 2023 global revenues. Financials remain robust for the firm as it has witnessed 87 consecutive quarters of top-line revenue growth, the longest streak of any S&P500 company.
Equinix Inc. (NASDAQ:EQIX) closed a good Q3 with quarterly revenues increasing 7% over the same quarter last year to $2.2 billion. The firm has also been investing across its global operations to support the digital infrastructure needs of customers. Equinix currently has 57 major projects underway across 22 countries, including 13 xScale projects, that represent over 22,000 cabinets of retail capacity and over 100 megawatts of xScale capacity to be delivered through the end of 2025.
With digital infrastructure becoming crucial to delivering services globally, Equinix Inc. (NASDAQ:EQIX) is in an attractive spot to capitalize on the opportunities lying ahead. As of Q3, the company is held by 55 hedge funds, thereby ranking among the 10 best real estate and realty stocks to buy according to hedge funds.
1. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 73
American Tower Corporation (NYSE:AMT) is one of the largest global real estate investment trusts founded in 1995 as an American Radio subsidiary. The firm offers services and solutions to deploy and support wireless networks in 24 countries across six continents. It has a portfolio of independently owned US and international tower real estate and a network of data centers in the US. AMT’s customers include mobile network operators, multinational telecommunications companies, media and broadband providers, and government agencies.
The ongoing exponential growth in mobile data consumption has driven AMT’s performance in the US. The company’s 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 enabling it to navigate operational risks in new markets while simultaneously creating opportunities. With a resilient demand and strength of underlying fundamentals across the portfolio, AMT is well positioned.
The company is pursuing long-term growth by managing its diverse markets. AMT has planned to reduce its exposure to emerging markets which are more vulnerable to the macro environment as the firm continues to focus on incremental investments in developed economies. In September, AMT closed the sale of operations in India to Data Infrastructure Trust, an Infrastructure Investment Trust sponsored by an affiliate of Brookfield Asset Management.
For the third quarter of 2024, the firm’s total revenue grew by less than 0.1% to $2,522 million while net income and adjusted EBITDA declined. As emphasized by CEO Steven Vondran, the carrier rollouts of 5G coverage tend to support robust activity levels in the United States and Europe while demand for AMT’s global portfolio of communications infrastructure assets is evident. Hence, American Tower Corporation (NYSE:AMT) is a leading independent owner, operator, and developer of multi-tenant communications real estate, having a solid portfolio of over 148,000 communications sites and a highly interconnected footprint of US data center facilities.
While we acknowledge the potential of AMT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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