In this article, we will take a detailed look at the 11 best beginner stocks to buy for investing in the real estate sector.
Could the Fed Interest Rate Cuts Potentially Ease the Housing Market?
The Federal Reserve finally decided to cut rates beginning with a half-percentage point reduction on September 18. This long-awaited move lowered rates to a range between 4.75% and 5.00%. The big rate cut is believed to have a mixed effect on the housing market. Industry experts believe that this cut will motivate more people to list their homes and more homebuyers to enter the market.
Simultaneously, falling mortgage rates have also been spurring the demand from homebuyers. The question that keeps coming up is how mortgage rates dropping further might actually drive home prices up as more buyers enter the market. In an interview with Straight Arrow News, Selma Hepp, Chief Economist at CoreLogic, mentioned how mortgage rates dropped in early spring of 2023 and led to a huge buyer influx resulting in higher home prices. On the bright side, a lot of inventory will be freed after being locked in for a long time, also referred to as the mortgage lock-in effect. Thus, the easing of locked-in inventory would restrict home price appreciation if mortgage rates decline more.
Meredith Whitney, founder and CEO of Meredith Whitney Advisory Group, seconded Hepp’s views while talking to CNBC. While she sees housing as the most important issue over the next few years, she calls affordability the biggest major problem. In her view, rates need to fall by another 50 to 100 base points, and importantly, home prices need to go down by 15% for the market to be healthy again. Therefore, the next President should allow the housing market to decline by 15%. This would eventually lead to a cheaper market that more people can afford to enter.
On the other hand, the future outlook of commercial real estate post-Fed rate cut will be more positive, as suggested by Gil Borok, Colliers U.S. and Latin America CEO. He explained to CNBC that the 50-basis point cut will go a long way to help commercial real estate and will spur new investment sales activity. With stronger returns to the office, offices are being utilized differently as compared to the pre-pandemic era, but they are being utilized more which is a good sign. Hence, the rate cut move should jolt office occupancy and multi-family home production.
Analysts see another positive aspect on the supply side of the market as they believe that the rate cut will ease out financing conditions for homebuilders and get them building again. Taking into account the news that officials have pointed to another half-point reduction before the year’s end, the builder sentiment can highly improve and contribute to fixing the currently low housing supply.
In conclusion, interest rate cuts have brought down the mortgage rates and are expected to bring more buyers to the market. More buyers imply more competition between them which points towards higher home prices. The main problem of US housing still revolves around decades of underbuilding and a chronic shortage of homes. However, homebuyers can feel optimistic since lower mortgage rates will unfreeze the for-sale market as existing homeowners escape the rate lock-in effect. Considering that nearly 9 in 10 mortgage holders have a rate below 6% as visible from Redfin data, the lock-in effect going away will significantly ease the tight housing market.
Now that we have analyzed the US housing market, let’s move to our list.
An aerial view of a real estate property with multiple buildings and pavement in the foreground.
Our Methodology:
We used the Finviz screener to create a list of 25 real estate stocks with the highest market capitalization, as of September 21. We then selected the 11 stocks from our list that were the most popular among elite hedge funds, as of Q2 2024. The stocks are sorted in ascending order of the number of hedge funds that have stakes in them.
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).
Real Estate Investing For Beginners: 11 Best Stocks To Buy
11. Century Communities, Inc. (NYSE:CCS)
Number of Hedge Fund Holders: 25
Century Communities, Inc. (NYSE:CCS) is an American home builder that operates in 18 states and over 45 markets across the United States. The company’s flagship brand Century Communities offers everything from single-family floor plans to condos and townhomes. Meanwhile, Century Complete brand provides built-in savings through an online purchase process and a versatile selection of quick move-in homes. The home builder engages in all aspects of homebuilding including the acquisition, entitlement, and development of land, construction, innovative marketing, and sale of homes. Title, insurance, and lending services are also offered through the Parkway Title, IHL Home Insurance Agency, and Inspire Home Loan subsidiaries.
Century Communities, Inc. (NYSE:CCS) remains geographically diverse and strategically positioned through a well-set national footprint. Hence, it occupies meaningful market-share positions across high-growth US markets. The builder has also demonstrated a strong track record of growth as evident from its 21 consecutive years of profitability. The firm is targeting the broadest potential pool of customers through its concentration in the attractive, entry-level segment. Considering the decades-old low US housing supply, this focus allows the Century Complete brand to address the shortage.
Highlights from the firm’s fiscal second quarter include a 35% year-over-year increase in lot count and a 14% rise in the community count as compared to 2023. Backed up by the high demand for affordable new homes with quick move-ins, deliveries of 2,617 climbed 17% year-over-year. The home builder also saw growth in all of its segments with net new home contracts increasing by 20% year-over-year.
With a large national scale which drives greater purchasing power and enhanced homebuilding efficiencies, as well as a pattern of consistent growth, Century Communities, Inc. (NYSE:CCS) is a promising best real estate stock to buy.
10. Compass, Inc. (NYSE:COMP)
Number of Hedge Fund Holders: 28
Compass, Inc. (NYSE:COMP) serves as the largest independent real estate brokerage in the United States. The firm offers an end-to-end platform that includes an integrated suite of cloud-based software for customer relationship management, marketing, client service, brokerage services, and other critical functionality, custom-built for the real estate industry. The company was founded in 2012 and is based in New York City,
Compass calls itself the future of real estate with the sophistication of a luxury brand and the solutions-driven approach of a startup. The firm is positioned uniquely in the real estate industry based on its national scale, exclusive inventory, top agent network, and the integrated nature of its end-to-end platform. Currently, the brokerage firm is delivering its best-ever performance. As reported by NAR, transactions for the entire US residential real estate market declined 3.3% during Q2 while Compass agents helped achieve a yearly increase of 11.4% in transactions.
Although the real estate market saw historically low volume during the recent quarter, Compass, Inc. (NYSE:COMP) recorded an all-time high net income of $20.7 million, an all-time high Adjusted EBITDA of $77.4 million, and a positive free cash flow. The firm also expanded its number of principal agents by adding more than 2,000 principal agents from the acquisitions of Latter & Blum and Parks Real Estate and more than 500 principal agents organically.
With quarterly market share increased to 5.13% and the firm’s structural advantages which have clearly translated into financial advantages, Compass, Inc. (NYSE:COMP) is a well-established brokerage firm that differs from the competition and tends to be attractive to investors.
9. Howard Hughes Holdings Inc. (NYSE:HHH)
Number of Hedge Fund Holders: 35
Howard Hughes Holdings Inc. (NYSE:HHH) owns, manages, and develops commercial, residential, and mixed-use real estate across the United States. The firm had four core segments including Operating Assets, Master Planned Communities (MPC), Seaport, and Strategic Developments which were managed separately. However, it completed the spinoff of Seaport Entertainment into a separate public company, Seaport Entertainment Group Inc., on July 31, 2024.
Howard Hughes serves as one of the strongest real estate platforms in the country as its portfolio remains strategically positioned to meet and fasten development based on market demand. This portfolio of award-winning, large-scale mixed-use assets in some of the nation’s most sought-after communities makes the company unique. Howard Hughes is also driving record-breaking results across its communities including Summerlin in Las Vegas, Ward Village in Honolulu, Downtown Columbia in Maryland, The Woodlands and Bridgeland in the Greater Houston region, and Teravalis in the Phoenix West Valley.
Howard Hughes Holdings Inc. (NYSE:HHH) continues to benefit from the demand across its national portfolio of acclaimed master-planned communities (MPCs). The firm continued strong performance across its core segments in the fiscal second quarter. While the MPC segment witnessed robust residential land sales, Operating Assets delivered a strong NOI performance. Simultaneously, demand for upscale condominium projects in Strategic Developments was strong.
The spinoff of Seaport Entertainment ended up crafting a refined identity for Howard Hughes. This is because the firm will now be focusing on what it is best at, building world-class master-planned communities. Moving forward, the firm is all set to take advantage of its unmatched landbank and opportunities for value creation and sustained growth.
As an established pure-play real estate company focused on developing world-class master-planned communities, Howard Hughes Holdings Inc. (NYSE:HHH) looks in a good spot to further unlock its growth potential. As of Q2, the stock is held by 35 hedge funds and ranks among the 11 best real estate stocks to buy for beginners.
8. Costar Group, Inc. (NASDAQ:CSGP)
Number of Hedge Fund Holders: 42
Costar Group, Inc. (NASDAQ:CSGP) operates as a global provider of commercial and residential real estate information, analytics, and online marketplaces. The company strives on a mission to digitize the world’s real estate. To provide solutions across the real estate landscape, the firm has multiple brands including CoStar, LoopNet, Ten-X, Apartments.com, Homes.com, STR, BizBuySell, CoStar Real Estate Manager, Land.com, Thomas Daily, OnTheMarket, Business Immo, Belbex, Grecam, and BureauxLocauX.
CoStar has built the aforementioned international network of over 27 internationally recognized brands through strategic acquisitions and consistent, organic growth. This network of brands is robust as it attracts more than 100 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 more than $100 billion.
During the second quarter, the firm recorded revenue of $678 million, up 12% year-over-year. The individual businesses also showed a strong performance. Apartments.com grew revenue by 18% and CoStar by 10%, since the prior-year period. CoStar Group hit the milestone of a record 183 million monthly average unique visitors. The commercial information and marketplace businesses delivered 41% profit margins in the quarter.
The firm’s competitive edge in commercial real estate and the substantial growth that lies ahead of it make it an attractive choice for investors. The stock was held by 42 hedge funds, as of 2024’s second quarter thereby ranking on our list.
7. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 43
KE Holdings Inc. (NYSE:BEKE) operates Beike, an integrated online and offline platform for housing transactions and services in China which was launched in 2018. It also owns and operates Lianjia, China’s leading real estate brokerage brand which is an integral part of the Beike platform. The company operates through segments including Existing Home Transaction Services, New Home Transaction Services, Home Renovation and Furnishing, and Emerging and Other Services.
KE Holdings Inc. (NYSE:BEKE) serves as a pioneer in building the infrastructure and standards to reinvent how service providers and customers complete housing transactions in China including existing and new home sales, home rentals, home renovation and furnishing, and other services. The firm’s industry experience remains strong as well. Since its founding in 2001, it has over 21 years of solid operating experience through Lianjia. Furthermore, the firm has a robust balance sheet with healthy cash inflows.
For the fiscal second quarter of 2024, the company was capable of delivering results that exceeded the market performance. Total net revenues were up 19.9% year-over-year. Net revenues from existing home transaction services increased by 14.3% over the year. Non-housing transaction services also accelerated with net revenues from home renovation and furnishing business increasing 53.9% and home rental services climbing 167.1%, year-over-year. Net income rose 46.2% year-over-year which demonstrates resilient profitability.
With the significant optimistic potential of the overall business in the form of growth in home transaction services, home renovation and furnishing, and home rental services, the future of KE Holdings Inc. (NYSE:BEKE) looks promising. As of 2024’s second quarter, the stock is held by 43 hedge funds.
6. Digital Realty Trust, Inc. (NYSE:DLR)
Number of Hedge Fund Holders: 44
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 are meant to support enterprises and service providers and to meet critical infrastructure needs. The firm was incorporated in Maryland in March 2004.
The company’s leading data center platform capitalizes on the growing global demand from a diversified customer base. Digital Realty Trust, Inc. (NYSE:DLR) has a global footprint with local expertise and connectivity to the locations that matter most with more than 300 data centers across more than 25 countries and more than 50 global metros. The company has a proven track record of sustainable growth as it 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 firm saw 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 Q2, the stock is held by 44 hedge funds.
5. SBA Communications Corporation (NASDAQ:SBAC)
Number of Hedge Fund Holders: 45
SBA Communications Corporation (NASDAQ:SBAC) is an independent owner and operator of wireless communications infrastructure such as towers, buildings, rooftops, distributed antenna systems, and small cells. The company came into being in 1989 and is based in Boca Raton, Florida. It receives revenue from two primary businesses, site leasing and site development. The firm’s presence spans the Americas, Africa and Asia.
Based on market capitalization, SBAC becomes one of the largest real estate investment trusts. The company has a well-positioned and geographically diverse wireless communications infrastructure. Its business model capitalizes on the exponential growth in mobile data consumption. The market opportunity remains significant with almost 8.9 billion global mobile subscribers which drives the demand for wireless infrastructure. Hence, a strong and proven business model in a booming market gives firm growth as well as stability.
The firm recently reported solid financial results for the second quarter of 2024. While new leasing activity picked up pace internationally, it received increased inquiries from customers in the US which is a good sign. The firm delivered Industry-leading AFFO per share of $3.29, a 1.5% increase year-over-year. With a business depicting strength, SBA Communications Corporation (NASDAQ:SBAC) is well-positioned to drive growth from the network needs of its customers.
SBA Communications Corporation (NASDAQ:SBAC) tends to be a compelling investment based on its leading position in the global wireless communications infrastructure market. The stock is also cheap as it trades at 25 times its forward earnings, at a discount of 36.62% to the sector.
4. CBRE Group, Inc. (NYSE:CBRE)
Number of Hedge Fund Holders: 54
CBRE Group, Inc. (NYSE:CBRE) is a worldwide real estate services and investment firm based in Dallas, Texas. The firm operates across every dimension of commercial real estate and has the leading global market position in leasing, property sales, outsourcing, property management, and valuation. The company serves clients in over 100 countries through its employee base of more than 130,000. These clients are served through three business segments including REI (real estate investments), advisory services, and GWS (global workplace solutions). CBRE offers an integrated suite of services such as facilities, transaction and project management, and property management. investment management, appraisal and valuation, property leasing, strategic consulting, property sales, mortgage services, and development services.
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.
The firm’s second quarter was marked by the outperformance of each of the three business segments While the GWS net revenue climbed 16% year-over-year and the Advisory Services net revenue grew 8.6% year-over-year, 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.
The firm has also been fueling its growth through strategic acquisitions. CBRE acquired Direct Line Global, the world’s largest global technology company across the hyperscale, co-location, and enterprise markets. This enhanced the firm’s capabilities in data center management which is rapidly growing. CBRE also announced plans to combine its project management business with its Turner & Townsend subsidiary. The combined business will be a separate business segment beginning in 2025 and will potentially impact CBRE’s future given its huge scale.
CBRE Group, Inc. (NYSE:CBRE) tends to occupy a strong leadership position in a growing industry. The stock is currently trading at 25 times its forward earnings, a discount of 34.52% to the sector. As of Q2, the company was held by 54 hedge funds.
3. Equinix, Inc. (NASDAQ:EQIX)
Number of Hedge Fund Holders: 56
Equinix Inc. (NASDAQ:EQIX) is one of the largest digital infrastructure companies globally which specializes in Internet connection and data centers. The REIT was formed in Silicon Valley in 1998 as a vendor-neutral multitenant data center provider. It currently operates in 33 countries globally and enables businesses to scale across the world’s biggest network of interconnected data centers.
Equinix Inc. (NASDAQ:EQIX) has a global ecosystem that is larger than its next 10 competitors combined since it provides customers access to more than 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. Furthermore, the financial performance of the firm is highly commendable with 86 consecutive quarters of top-line revenue growth, the longest streak of any S&P500 company.
During the fiscal second quarter, the firm witnessed record gross bookings and adjusted EBITDA crossing the $1 billion quarterly threshold for the first time. Net income increased 45% year-over-year to $301 million. 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) is in a unique and attractive spot to drive its growth and profitability. The firm ranks among the 11 best stocks to buy for investing for beginners.
2. Prologis, Inc. (NYSE:PLD)
Number of Hedge Fund Holders: 56
Prologis, Inc. (NYSE:PLD) is a global leader in logistics real estate which focuses 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. The firm leases modern logistics facilities to 6,700 customers across two categories, business-to-business and retail/online fulfillment.
Prologis, Inc. (NYSE:PLD) has been the world’s leading industrial real estate company for 40 years. It claims that 2.8% of the global GDP flows through its distribution centers globally. Additionally, its irreplicable premier global portfolio makes it stand out. The firm owned or had investments in properties and development projects amounting to nearly 1.2 billion square feet in 19 countries, as of June 30. The top retail, e-commerce, and logistics companies including Amazon, FedEx, DHL, and Maersk have chosen the firm as their real estate partner.
The REIT continues to outperform the industry. With a pickup in overall market activity, Prologis leased 52 million square feet in its portfolio during the second quarter which reflects a 27% increase over the first quarter and one of its highest quarters in the past several years. While the customer demand was subdued, it is improving and is expected to continue improving which is a good sign for the company. The firm also sees its future growth in opportunities in data centers and energy.
In conclusion, Prologis, Inc. (NYSE:PLD) has an industry-leading position with its one-of-a-kind portfolio and leading innovation in next-generation logistics technologies. As of Q2, the stock is held by 56 hedge funds.
1. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 63
American Tower Corporation (NYSE:AMT) is an American real estate investment trust that provides infrastructure for modern digital communications and has a presence in 25 countries. The company is a leading independent owner, operator, and developer of multitenant communications real estate. Other than leasing space on its communications sites to tenants, the REIT offers customized services and solutions such as site acquisition, zoning and permitting, and structural analysis.
American Tower Corporation (NYSE:AMT) has served as a leader and innovator for digital connectivity. The REIT is uniquely positioned as one of the largest publicly held global real estate investment trusts. It has a solid global portfolio comprising 224,000 communications sites, including almost 43,000 properties in the US and Canada and more than 181,000 properties internationally.
The REIT benefits from the strong underlying demand for its portfolio of communications assets and has successfully continued its momentum from the start of 2024 to the second quarter. The second quarter’s strong performance was supported 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. This drove a 13.5% attributable AFFO growth in the quarter.
The company expands its long-term growth potential by efficiently managing its diverse global footprint. Since macroeconomic factors have had a profound impact on emerging markets, they seem risky. Thus, the company has planned to reduce its relative exposure to emerging markets over time as it continues to focus on incremental investments in developed economies.
The strong secular trends, an established portfolio, and a clear plan for sustained long-term growth deem American Tower Corporation (NYSE:AMT) one of the best real estate stocks to buy for beginners. The company is a cheap investment as it is trading at 35 times its forward earnings, an 11.22% discount to the sector. As of Q2, the stock is held by 63 hedge funds.
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.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
