We recently compiled a list of the 8 High Growth Real Estate Stocks That Are Profitable in 2024. In this article, we are going to take a look at where Realty Income Corporation (NYSE:O) stands against the other high growth real estate stocks.
Real Estate Sector at a Glance: Recent Updates
In the week ended October 4, the average contract rate on a 30-year fixed-rate mortgage rose 22 basis points as stated by the Mortgage Bankers Association which marks the highest weekly increase in more than a year. As the 30-year fixed rate hit 6.36%, applications to refinance a home loan dropped 9% for the week while applications for a mortgage to purchase a home were reported to be flat, declining by 0.1% from the prior week. Relative to 1 year ago, refinance applications were up 159% and purchase applications were up 8%.
With the Fed cutting rates, many homebuyers who were on the sidelines for long are returning to the market with a rise in homebuying demand and purchase applications. Glenn Kelman, Redfin CEO, believes the Fed rate cut was late for the current season to have a major impact but would help many homebuyers in 2025. He told CNBC that only 2.5% of American homes changed hands within the last 12 months which indicates so many being locked into low mortgage rates. Thus, the market is still struggling with low inventory which is exactly going to be the gating factor for home sales in 2025. While the market looks forward to further rate cuts, Kelman thinks of inventory as a major long-term problem that remains unaddressed.
Another factor currently impacting US real estate is natural disasters such as hurricanes hitting Florida. In an interview with CNBC, Eddie Shapiro, Nest Seekers International president and CEO, discussed the state of the housing market in this regard. In his opinion, Florida is a rather strong and resilient market and hence the rebuilding and recovery would be quicker. Even with one rate cut, he views the momentum to be positive across the market. While the firm recorded its greatest August and September in a really long time, the overall market is entering a sweet spot for mortgage rates which are now in the 6% range.
Our Methodology:
In order to compile a list of the 8 high-growth real estate stocks that are profitable in 2024, we created an initial list of 30 companies with the biggest market caps in the sector. Moving on, we screened out those that had a positive net income in the last twelve months and a positive 5-year net income CAGR. Additionally, these companies were deemed high growth since they had their 5-year net revenue CAGR higher than 10%. Finally, we ranked the shortlisted companies in ascending order of their hedge funds, as of Q2 2024.
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).
A modern city skyline with a REIT retail building at the center to symbolize the company’s reach.
Realty Income Corporation (NYSE:O)
5-Year Net Income Growth: 16.67%
5-Year Revenue Growth: 27.50%
TTM Net Income: $838.38 Million
Number of Hedge Fund Holders: 19
Realty Income Corporation (NYSE:O) invests in diversified commercial real estate. The company has a portfolio of 15,450 properties in all 50 US states, the UK, and six other countries in Europe.
Realty Income Corporation is one of the largest REITs with a growing global presence. The firm’s real estate portfolio stands diversified spanning 1,551 clients and 90 industries. The growth thesis for the firm is extensive with a $5.4 trillion total addressable market in the US and an attractive growth avenue with limited direct competition in Europe. Furthermore, it has delivered nearly 5% AFFO growth in both higher and lower interest rate environments.
The company is positioned for growth with an estimated global net lease addressable market of approximately $14 trillion. Another reason investors should consider Realty Income Corporation (NYSE:O) is that the firm has a strong dividend track record with 29 consecutive years of rising dividends. Recently, the REIT announced the 652nd consecutive common stock monthly dividend.
During the second quarter, the firm’s AFFO per share increased 6.0% to $1.06 as compared to the prior year period. With a portfolio of leading clients, a strong liquidity position, and a stable and growing cash flow, Realty Income Corporation (NYSE:O) is set to continue the business momentum through 2024.
Realty Income Corporation (NYSE:O) serves as a real estate partner to the leading companies in the world. The firm has a diversified real estate portfolio, an expanding footprint, and a strong growth trajectory to follow. Furthermore, the REIT has shown stable growth in fluctuating environments.
Overall O ranks 8th on our list of the high growth real estate stocks that are profitable in 2024. While we acknowledge the potential of O 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 O but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.