In this article, we discuss the 5 best commercial real estate stocks to buy according to hedge funds. If you wish to go through our detailed analysis of the real estate market, check out the 12 Best Real Estate and Realty Stocks to Buy According to Hedge Funds.
5. CoStar Group, Inc. (NASDAQ:CSGP)
Number of Hedge Fund Holders: 43
CoStar Group, Inc. (NASDAQ:CSGP) is a Washington, DC-based provider of information, analytics, and marketing services to the commercial property industry in the United States, Canada, the United Kingdom, France, Germany, and Spain. Its research services include online services and research for the rental home and hotel industry.
Insider Monkey looked through 943 hedge fund holdings for Q1 2023 and found that 43 had invested in the firm. CoStar Group, Inc. (NYSE:CSGP)’s largest investor is Charles Akre’s Akre Capital Management with a $489.6 million stake.
Baron Real Estate Fund made the following comment about CoStar Group, Inc. (NASDAQ:CSGP) in its first quarter 2023 investor letter:
“Shares of CoStar Group, Inc. (NASDAQ:CSGP). declined 11% in the first quarter of 2023 after performing well on a relative basis last year. We attribute the stock’s decline to management announcing a dramatic increase in its investment to grow its residential business. Despite the decline, we remain optimistic about the long-term prospects for CoStar and acquired additional shares late in the first quarter.
CoStar is the leading provider of information, analytics, and marketing services to the real estate industry. CoStar initially focused on serving the domestic commercial real estate industry and built a comprehensive proprietary database of essential data to help participants buy, sell, and lease properties. The company has since expanded its focus to offer products and services to multi-family, industrial, commercial land, mixed-use and hospitality end-markets across North America and Western Europe.
Today, the company’s non-residential operations generate over $2 billion of recurring revenue with cash flow (EBITDA) margins above 40%. We expect this portion of the business to grow its revenue at a mid-teens rate for several years as the company launches new products, upsells existing customers, and raises prices. We expect profit and cash flow to grow at an even faster rate given the low marginal costs inherent in CoStar’s business model. We think that cash flow from this business can double over the next five years, which implies a similar return for the stock…” (Click here to read the full text)
4. Crown Castle Inc. (NYSE:CCI)
Number of Hedge Fund Holders: 43
Crown Castle Inc. (NYSE:CCI) is a real estate investment trust and provider of shared communications infrastructure in the United States. Its network includes over 40,000 cell towers and approximately 85,000 route miles of fiber supporting small cells and fiber solutions. Crown Castle Inc. (NYSE:CCI) currently pays a quarterly dividend of $1.565 per share and has a dividend yield of 5.49%, as of June 1. The company has been raising its dividends consistently for the past eight years.
By the end of 2023’s first quarter, 43 of the 943 hedge funds part of Insider Monkey’s database had invested in the REIT. Crown Castle Inc. (NYSE:CCI)’s largest investor is the Bill & Melinda Gates Foundation Trust, with stakes valued at $190 million.
3. Blackstone Inc. (NYSE:BX)
Number of Hedge Fund Holders: 45
Blackstone Inc. (NYSE:BX) is an American alternative investment management company based in New York City. Blackstone’s private equity business has been one of the largest investors in leveraged buyouts in the last three decades, while its real estate business has actively acquired commercial real estate.
Craig Siegenthaler, an analyst at BofA, raised the price target on Blackstone Inc. (NYSE:BX) from $98 to $109 on April 21, while maintaining a Buy rating on the shares in light of the Q1 report. Despite the difficult fundraising landscape, especially for real estate debt and credit ventures, the analyst expects Blackstone Inc. (NYSE:BX) to secure over $150 billion in fundraising this year.
According to Insider Monkey’s first quarter database, 45 hedge funds were long Blackstone Inc. (NYSE:BX), compared to 51 funds in Q4 2022. Thomas Steyer’s Farallon Capital is the biggest stakeholder of the company, with 3.2 million shares worth $241 million.
Baron Real Estate Fund made the following comment about Blackstone Inc. (NYSE:BX) in its first quarter 2023 investor letter:
“Blackstone Inc. (NYSE:BX) is the world’s largest alternative asset manager with $1 trillion in assets under management and the largest real estate manager in the world. Blackstone has a premier brand, a global franchise, loyal customers, an exceptional balance sheet, and an excellent management team.
It is currently valued at a modest premium to the S&P 500 Index multiple despite far superior long-term growth prospects. The company’s current dividend yield is 5.2%
We are optimistic about the long-term prospects for Brookfield and Blackstone because we believe both companies are likely to increase market share in a secular growth opportunity for alternative assets…” (Click here to read the full text)
2. Prologis, Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 51
Prologis, Inc. (NYSE:PLD) is a real estate investment trust headquartered in San Francisco, California that invests in logistics facilities. The company was formed through the merger of AMB Property Corporation and Prologis in June 2011, which resulted in Prologis being one of the largest industrial real estate companies in the world. The industrial REIT also ranks as an elite dividend stock, having increased its dividend at a 15% compound annual rate since its initial public offering (IPO).
Insider Monkey’s proprietary database of 943 hedge funds shows that 51 hedge funds had stakes in Prologis, Inc. (NYSE:PLD). The most notable stakeholder of Prologis, Inc. (NYSE:PLD) was Jeffrey Furber’s AEW Capital Management which owns a $350.77 million stake.
Baron Real Estate Fund made the following comment about Prologis, Inc. (NYSE:PLD) in its first quarter 2023 investor letter:
“Industrial REITs that we expect to benefit from ongoing robust warehouse demand and increased rents fueled by the growth in e-commerce and the buildout of logistics’ supply chains. Examples: Prologis, Inc. (NYSE:PLD), Rexford Industrial Realty, Inc., EastGroup Properties, Inc., and Terreno Realty Corporation.
Prologis, Inc. is the world’s largest industrial REIT. The company owns a high-quality real estate portfolio that is concentrated in major global trade markets and large population centers across the Americas, Europe, and Asia. Prologis has an unmatched global platform, strong competitive advantages (scale, data, and technology), and attractive embedded growth prospects. The company is the only industrial REIT with an ‘A’ credit rating.
Following a decline in its shares of more than 30% in 2022, we believe Prologis’ current implied capitalization rate of 4.2% is compelling given that the company’s rents on its in-place leases are more than 65% below current market rents, thus providing a strong runway for growth in the next three to five years.
Following strong quarterly results, the shares of Prologis, Inc., the world’s largest industrial REIT, performed well in the first quarter of 2023. The company owns a high-quality real estate portfolio that is concentrated in major global trade markets and large population centers across the Americas, Europe, and Asia. Prologis has an unmatched global platform, strong competitive advantages (scale, data, and technology), and attractive embedded growth prospects. The company is the only industrial REIT with an ‘A’ credit rating.”
1. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 65
American Tower Corporation (NYSE:AMT) is an American real estate investment trust that operates as an owner and operator of wireless and broadcast communications infrastructure in several countries worldwide. Headquartered in Boston, Massachusetts, it was ranked 375th on the Fortune 500 in 2022. One of the largest global REITs, American Tower Corporation (NYSE:AMT) manages around 223,000 global communication assets. The real estate company currently pays a quarterly dividend of $1.57 per share with a yield of 3.24%.
The number of hedge funds in Insider Monkey’s database owning stakes in American Tower Corporation (NYSE:AMT) grew to 65 in Q1 2023, from 61 in the previous quarter. The consolidated value of these stakes is over $3.2 billion.
ClearBridge Investments mentioned American Tower Corporation (NYSE:AMT)’s long-term growth prospects in its Q4 2022 investor letter.
“Real estate and communication services sectors generated positive returns but lagged others within the Russell 1000 Value Index. The Strategy benefited from its underweight in the real estate sector with American Tower Corporation (NYSE:AMT) as its only holding. REITs are generally perceived to be interest rate sensitive, which negatively impacted American Tower’s recent stock performance. However, we remain confident in the company’s highly durable and predictable business model, which is supported by long-term customer contracts and insatiable wireless data growth.”
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