We recently published a list of 10 Most Undervalued REIT Stocks to Invest In Now. In this article, we are going to take a look at where Rithm Capital Corp. (NYSE:RITM) stands against other most undervalued REIT stocks to invest in now.
Where is the Real Estate Sector Heading?
According to the National Association of Realtors, sales of previously owned homes in February increased 4.2% from January while they were 1.2% lower year-over-year. Home buyers are slowly moving into the market although mortgage rates have not changed much. Although the market is still tight, it is witnessing more inventory and choices, with the inventory at February end standing at 1.24 million units thereby representing a 17% rise year-over-year. The tight supply is still driving home prices up since the median price of a home sold in the month of February was 3.8% higher, as compared to last year.
Lawrence Yun, NAR’s chief economist, previously appeared on CNBC to give insights on the state of the housing market. In his opinion, if inflation comes down due to deregulation policies despite the tariff conditions or more home construction occurs with the federal government opening up for more development, the market might see lower mortgage rates along with the Fed rate cut. Simultaneously, the Federal Reserve decided to hold the interest rates steady amidst uncertainties around tariffs.
Logan Mohtashami, HousingWire lead analyst, thinks the cure for tariffs is lower mortgage rates. In an interview with CNBC, he said that if mortgage rates go down and new home sales start to grow, the builder would find a way to sell homes and build homes. Although builder sentiment has recently fallen considering their profit margins are stressed amidst tariffs, this sentiment tends to increase with rates going down.
Our Methodology
In order to compile a list of the 10 most undervalued REIT stocks to invest in now, we first used a stock screener to shortlist REIT stocks trading at a forward P/E of less than 15, as of March 25. From this list, we selected the top 10 stocks with the highest number of hedge fund holders, as of Q4 2024. The 10 most undervalued REIT stocks to invest in now have been arranged in ascending order of the number of hedge funds that disclosed stakes in them at the end of Q4 2024.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A real estate executive standing in front of a row of newly constructed townhomes.
Rithm Capital Corp. (NYSE:RITM)
Number of Hedge Fund Holders: 33
Forward P/E: 5.79
Rithm Capital Corp. (NYSE:RITM) is an asset manager focused on real estate and financial services. The firm invests across a variety of real estate and financial services assets some of which include residential mortgage loans, consumer loans, residential transitional loans, and commercial real estate. The firm was formed as a limited liability company in September 2011 and has been structured as an internally managed REIT since June 2022. Rithm Capital Corp. (NYSE:RITM) owns and actively manages a family of operating companies across the complete real estate and lending lifecycle including Newrez, Genesis Capital, and Sculptor.
Rithm Capital Corp. (NYSE:RITM) serves as a high-performing diversified asset manager currently leveraging the strength of its vertically integrated operating companies with capabilities in direct asset sourcing, asset optimization, and capital markets. The firm closed 2024 with robust earnings and a strong performance in each of its core businesses. With regards to Genesis Capital, the firm had a record FY24 origination volume of $3.6 billion, based on a high-performing client franchise and an expanding product suite. Simultaneously, Newrez had $844 billion in total servicing, positioned as the number three servicer, and $59 billion in FY24 funded volume.
Overall, RITM ranks 2nd on our list of most undervalued REIT stocks to invest in now. While we acknowledge the potential of RITM 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 time frame. If you are looking for a deeply undervalued AI stock that is more promising than RITM 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.