Given the low interest rate environment where the 10 year yield is under 1.9%, it isn’t surprising that REITs are a popular investment choice for many investors. Not only do many REITs pay attractive dividends, but also they offer opportunities for capital appreciation too. In this article, seeing as how hedge funds have more resources than the average investor, we analyze how they are positioned among five popular REITs, Gaming and Leisure Properties Inc (NASDAQ:GLPI), American Tower Corp (NYSE:AMT), Crown Castle International Corp (NYSE:CCI), Equinix Inc (NASDAQ:EQIX), and Northstar Realty Finance Corp (NYSE:NRF).
Hedge fund sentiment is an important metric for assessing the long-term profitability. At Insider Monkey, we track over 700 hedge funds, whose quarterly 13F filings we analyze and determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (see the details here).
#5 Northstar Realty Finance Corp (NYSE:NRF)
– Total Value of Hedge Fund Holdings (as of March 31): $343.21 million
– Hedge Fund Holdings as Percent of Float (as of March 31): 14.20%
On May 6, news broke that Colony Capital Inc (NYSE:CLNY) might partner with Northstar Realty Finance Corp (NYSE:NRF) to acquire NorthStar Asset Management Group Inc (NYSE:NSAM). If a merger is consummated, the company’s big discount to its net asset value of around $24 per share due to the externally managed REIT discount might disappear. Northstar could also potentially realize substantial synergies with Colony Capital. With 38 funds from our database holding shares, Northstar is the fifth most popular REIT held by the elite funds in our database and sports a dividend yield North of 12%.
Follow Northstar Realty Finance Corp. (NYSE:NRF)
Follow Northstar Realty Finance Corp. (NYSE:NRF)
#4 American Tower Corp (NYSE:AMT)
– Number of Hedge Fund Holders (as of March 31): 40
– Total Value of Hedge Fund Holdings (as of March 31): $2.58 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 6.00%
40 elite funds held American Tower Corp (NYSE:AMT) shares at the end of the first quarter, up 2 funds from the previous quarter. In April, American Tower continued its international expansion by agreeing to invest $2 billion in India, including taking a 51% stake in Viom Networks. Viom is one of India’s leading tower operators with more than 42,200 towers. The purchase and Indian expansion should give American Tower more growth and more diversified cash flows. Shares are up by 9.14% year-to-date and pay a 1.94% dividend yield at current prices. Doug Silverman and Alexander Klabin’s Senator Investment Group is one of the top shareholders of the REIT.
Follow American Tower Corp (NYSE:AMT)
Follow American Tower Corp (NYSE:AMT)
– Number of Hedge Fund Holders (as of March 31): 43
– Total Value of Hedge Fund Holdings (as of March 31): $2.98 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 13.00%
With shares up 21% year-to-date, Equinix Inc (NASDAQ:EQIX) is one of the best performing REITs so far this year. Although it trades at a pricey forward valuation, investors like Equinix’s growth prospects, as demand for data centers will only increase as more of the world connects online. Equinix’s reported mixed results for its first quarter, with Adjusted Funds From Operations (AFFO) of $2.98 per share, missing by $0.25 per share. Revenue was $844.2 million, exceeding estimates by $9.02 million. The company provided stronger-than-expected Guidance, however, with full-year EBITDA expected at $1.65 billion or more versus the consensus of $1.64 billion. The stock pays a 1.93% dividend yield at the moment.
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Follow Equinix Inc (NASDAQ:EQIX)
– Total Value of Hedge Fund Holdings (as of March 31): $1.85 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 6.40%
Follow Crown Castle Inc. (NYSE:CCI)
Follow Crown Castle Inc. (NYSE:CCI)
#1 Gaming and Leisure Properties Inc (NASDAQ:GLPI)
– Number of Hedge Fund Holders (as of March 31): 59
– Total Value of Hedge Fund Holdings (as of March 31): $1.32 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 36.60%
Gaming and Leisure Properties Inc (NASDAQ:GLPI) is one of only two gaming focused REITs in the United States. The company was spun-off from gaming operator Penn National in November 2013 and has steadily grown its dividend by increasing its AFFO through acquisitions. On April 29, Gaming and Leisure Properties closed on its largest acquisition of call, the $4.4 billion takeover of the real estate of Pinnacle through a spinoff. Due to the transaction, Gaming and Leisure Properties expects to raise its quarterly dividend to $0.60 per share in the third quarter from the $0.56 per share it pays now. That translates to a forward earnings yield of over 7% in the third quarter at current prices.
