In this article, we discuss the 5 best real estate stocks to buy now. If you want to read our discussion on the real estate sector, go directly to 12 Best Real Estate Stocks To Buy Now.
5. Equinix, Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 38
Equinix, Inc. (NASDAQ:EQIX) is a Redwood, California-based digital infrastructure corporation that has a specialty in providing data centers to multiple tenants. The facility allows competing networks to share data traffic. Equinix, Inc. (NASDAQ:EQIX) takes ESG concerns very seriously, as 95% of its data centers globally consume 100% clean and renewable energy.
Richard Choe at JPMorgan thinks that Equinix, Inc. (NASDAQ:EQIX) is observing strong demand trends from providers of enterprise and cloud services. The analyst has given Equinix, Inc. (NASDAQ:EQIX) stock an Overweight rating and a target price of $850 in an investor note issued on August 24 following a meeting with the management. Experts think that some of the higher costs being incurred will be combated by the pricing actions of the company, which will result in revenue growth. Meanwhile, better efficiency in operations will result in the growth of funds from operations (FFO). Equinix, Inc. (NASDAQ:EQIX) has an attractive annual payout of $12.40 per share as of September 26. These factors make Equinix, Inc. (NASDAQ:EQIX) one of the best real estate stocks to buy now.
In its Q2 2022 investor letter, Baron Funds shared its stance on Equinix, Inc. (NASDAQ:EQIX). Here’s what the firm said:
“Equinix, Inc. is a network dense global data operator of over 240 data centers in 69 metros and 30 countries. Its customers place high value on the ecosystem of customers that Equinix has curated within its data centers over many years so that they are able to interconnect within the data center facility instead of having data travel through the public internet (latency sensitive applications as well as data security considerations). Customers value the global network with 90% of customers in multiple metropolitan areas and 75% in multiple geographic regions.
Equinix has a diverse but valuable customer base with no single customer greater than 2.6% of recurring monthly revenues. COVID-19 has accelerated digital transformation priorities for many organizations, and we believe that Equinix will be poised to benefit from: i) organic growth through new bookings and pricing power (the majority of incremental bookings are from existing customers); ii) growth of high margin cross-connect revenue (approximately 20% of total); and iii) continued geographic expansion through development and select M&A. We believe the combination of these factors will allow the company to grow annual cash flow in the high singledigit range.”
4. CBRE Group, Inc. (NYSE:CBRE)
Number of Hedge Fund Holders: 42
CBRE Group, Inc. (NYSE:CBRE) is a Dallas, Texas-based provider of commercial real estate services globally. The company has a presence in over 100 countries through its 500 offices and a headcount of over 105,000 employees.
Despite the currency headwinds faced due to its global operations, CBRE Group, Inc.’s (NYSE:CBRE) Q2 2022 results revealed that all three business segments reported double-digit growth in revenue compared to the same period last year. Meanwhile, the core EPS for the period was the highest ever in the company’s history. Furthermore, CBRE Group, Inc. (NYSE:CBRE) has a high variable cost structure as 90% of the total costs are connected to revenue and are flexible. Experts believe that the current stock price has all the macroeconomic uncertainty priced in.
Here’s what Vulcan Value Partners said about CBRE Group, Inc. (NYSE:CBRE) in its Q2 2022 investor letter:
“We purchased CBRE Group Inc. (NYSE:CBRE) and Jones Lang LaSalle (NYSE:JLL) during the quarter, both of which have been successful investments for us in the past. CBRE and Jones Lang LaSalle are two of the largest commercial real estate services companies offering comprehensive real estate services globally. The companies serve real estate investors and corporate occupiers of real estate by providing leasing, brokerage, M&A and investment advisory, as well as property and facility management services.
To complement their core offerings, they also have large global real estate investment management businesses with steady recurring fees. The industry is highly fragmented. Industry consolidation has been occurring for decades, and we believe CBRE and Jones Lang LaSalle will continue to take market share. Both companies’ revenues are diversified by geography, asset class and service lines.
Additionally, CBRE and Jones Lang LaSalle have inherently variable cost structures. Neither company owns any real estate, which provides the flexibility to adjust costs when the macro environment becomes less favorable. The combination of declining share prices and stable values provided an opportunity to purchase two outstanding companies at a discount to their intrinsic values.”
3. Simon Property Group, Inc. (NYSE:SPG)
Number of Hedge Fund Holders: 45
Simon Property Group, Inc. (NYSE:SPG) is an Indiana-based REIT that owns community and lifestyle centers, outlet centers, and shopping malls. The company has the distinction of being the biggest owner of shopping malls across the US, with a presence in Europe and Asia as well.
Simon Property Group, Inc. (NYSE:SPG) stock is trading at an FFO yield of over 11% based on 2022 guidance, with a payout ratio that stands at 54% as of September 26. This reflects that the company’s strong forward dividend yield of over 7.7% is secured. Simon Property Group, Inc. (NYSE:SPG) owns 231 properties with a cumulative area of 186 million square feet. The company finished the most recent quarter with a cash balance of around $1 billion on its balance sheet and has a credit line of $7 billion at its disposal. Analysts think Simon Property Group, Inc. (NYSE:SPG) has bright future prospects, justifying its inclusion in our list of the 12 best real estate stocks to buy now.
Here’s what Baron Funds said about Simon Property Group, Inc. (NYSE:SPG) in its Q1 2022 investor letter:
“Following a share price gain of more than 97% in 2021, we recently trimmed the Fund’s holdings in Simon Property Group, Inc. (NYSE:SPG), the largest and premier mall operator in the U.S. Though we are also tempered by the expectation for modest earnings growth in 2022, we remain optimistic about the company’s long-term prospects. Simon owns A-quality malls in A-quality geographic locations. We expect Simon to benefit from the ongoing economic recovery and believe management is well positioned to acquire real estate assets given its strong balance sheet and low cost of capital.”
Simon Property Group, Inc. (NYSE:SPG) was held by 45 hedge funds at the end of Q2 2022.
2. Prologis, Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 49
Prologis, Inc. (NYSE:PLD) is a California-based corporation that owns and leases warehouses that become a platform for providing logistics solutions. The company owns the biggest collection of logistics real estate in the world.
In a research note issued on August 24, Blaine Heck at Wolfe Research upgraded Prologis, Inc. (NYSE:PLD) stock from a Peer Perform to an Outperform rating and gave it a target price of $200. The analyst revised his rating after incorporating the estimates for 2024 into his financial model. Heck has based the target price on the assumption that there will be a recession in late 2022, but Prologis, Inc. (NYSE:PLD) will continue to see its bottom line expand as it has a growth trajectory better than the industry outlook. Prologis, Inc. (NYSE:PLD) offers an annual forward dividend yield of 2.91% as of September 26.
Baron Funds shared its outlook on Prologis, Inc. (NYSE:PLD) in its Q2 2022 investor letter. Here’s what the firm said:
“In the second quarter, the shares of Prologis, Inc., the world’s largest industrial REIT, declined 29% as its valuation was reset for the higher interest rate environment and the possibility of still strong but perhaps moderating rent growth. On the other hand, the shares of Duke Realty Corporation, a $25 billion industrial REIT, declined only 7% in the second quarter, in large part because the company agreed to merge with Prologis at a 30% premium. We acquired additional shares in both companies in the most recent quarter. We are optimistic about the prospects for the combined Prologis/Duke Realty entity. Prologis is merging with its largest REIT competitor in Duke Realty. Duke’s industrial portfolio is among the best in industrial real estate. The company has an excellent track record in development and construction. We believe the merger has strategic and financial merits including acquiring a high-quality portfolio in mostly similar or attractive real estate markets and the likelihood of realizing both additional revenue and cost savings. We will have more to say on Prologis/Duke Realty in future shareholder letters.”
1. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 52
American Tower Corporation (NYSE:AMT) is a Boston, Massachusetts-based REIT that owns and operates wireless and broadcast communications infrastructure across the world. The company is one of the biggest REITs in the world, with a portfolio of 222,000 communication sites. It has over 43,000 properties in Canada and the US.
In an investor note issued on September 8, Philip Cusick at JPMorgan gave an Overweight rating on American Tower Corporation (NYSE:AMT) stock with a target price of $305. This development took place following a meeting with CFO Rod Smith. The analyst came out of the meeting with positive views on the company’s business operations in Asia, Europe, and the US and emerging trends from Africa and Latin America. The services business in the US is expected to remain strong in 2023 as the carriers will utilize and benefit from value-added offerings by American Tower Corporation (NYSE:AMT). American Tower Corporation (NYSE:AMT) offers an annual dividend of $5.88 per share, which translates into an annual dividend yield of 2.66% as of September 26.
Here’s what Baron Funds said about American Tower Corporation (NYSE:AMT) in its Q2 2022 investor letter:
“American Tower is a leading global tower company with 220,000 communication sites globally and over 40,000 in the U.S. We added to our position during the market dislocation and as it became increasingly clear that the company would put permanent equity financing in place at better-than-expected terms for its previously announced acquisition of CoreSite (thereby removing the “equity overhang”).
In addition, the company stepped back from a large potential deal in Europe, which would have required significant incremental funding, due to unfavorable contract terms and price. This decision further reinforced our confidence in management’s capital allocation discipline knowing that these were highly sought-after assets.”
As of Q2 2022, 52 funds held a stake in American Tower Corporation (NYSE:AMT).
You can also take a peek at Best Cloud Stocks To Buy and 10 Best ESG Stocks To Buy.
