UBS’ Top Quant Stocks In AI, IT, Healthcare & Other Sectors: Top 33 Stocks In All Sectors

30. AvalonBay Communities, Inc. (NYSE:AVB)

Number of Hedge Fund Investors In Q2 2024: 34

Sector: Real Estate

AvalonBay Communities, Inc. (NYSE:AVB) is a residential real estate company. The firm owns and operates close to a hundred thousand apartment homes in major US cities. Its shares have gained a modest 14.9% year to date as work-from-home trends and high rates have constrained the residential real estate market in major cities. Additionally, AvalonBay Communities, Inc. (NYSE:AVB) has also faced trouble in the Southern region of the US, where higher construction activity has inundated the market with properties and led to lower rent rates and depressed prices. For firms like AvalonBay Communities, Inc. (NYSE:AVB) which rely on debt to finance their properties this means that lower rent income stresses the balance sheet and constrains the ability to grow their property portfolio.

Baron Real Estate Fund mentioned AvalonBay Communities, Inc. (NYSE:AVB) in its Q2 2024 investor letter. Here is what the fund said:

“In the second quarter, we increased the Fund’s REIT exposure to best-in-class multi-family owners/operators Equity Residential and AvalonBay Communities, Inc. (NYSE:AVB).  Our meetings with each management team supported our view that both companies are led by astute executives that are highly focused on driving value creation for shareholders.

Equity Residential and AvalonBay each own approximately 80,000 apartment homes primarily in coastal markets. We believe these portfolios offer superior long-term growth prospects due to:

Favorable long-term demographic trends driven by strong population and job growth in their key geographic markets An undersupply of housing in the U.S. with outsized cost of ownership versus renting in their respective markets A high-earning, well-employed resident profile with attractive rent-to-income ratios allowing for future pricing power Low levered balance sheets which may present attractive opportunities for accretive external growth…” (Click here to read the full text)