U.S. Industrial REITs—How Are Small Cap Stocks Faring In Volatile Times?

I’ve been searching for a growth stock in the Industrial arena for my REIT portfolio. While large pure play Industrial REITs grew revenues between 6 and 11 percent last quarter, I’ve instead been entertaining the possibility of investing in two promising stocks whose growth rates have been more aggressive.

Sourced through Scoop.it from: www.gurufocus.com

STAG Industrial (NYSE:STAG) has suffered an amazing thirty-percent loss over the first eight months of the year, making it the worst performing stock amongst pure play Industrial Real Estate Investment Trusts, or REITs for short. To give you an idea just how incredible of a loss that is, Rexford Industrial (NYSE:REXR), the second worst performer, is down nearly half as much at eighteen percent. Another company that took a major hit is Monmouth Real Estate Investment (NYSE:MNR). Their share price fell by fourteen percent. All three companies are small capitalization stocks with a market cap below $1.2 billion.

That being said, STAG Industrial happens to be a stock with a greater chance for a quick recovery if the market bounces back to normal levels. STAG has a price to FFO of 12x, which is significantly below the average of 16x, and the small cap average of 16x. Operationally, we do not believe it is amongst the best, but the current market has beaten down the company mercilessly. We do see STAG as a short-term purchase. At least, if the stock does not appreciate, you will be able to profit from their eight-percent dividend yield.

In the Industrial REIT arena, small cap stocks have suffered far more than larger cap stocks. While larger cap stocks have returned an average of negative ten percent year to date, small cap investments are at negative sixteen percent. The general perception is that small cap stocks are far more vulnerable to volatile markets, and those figures appear to reinforce that perception. Although they are subject to larger swings, small cap stocks enjoy a greater upside because of their growth potential.

Terreno Realty Corporation (NYSE:TRNO) is the only small cap stock that has performed decently. So far this year, the company has a negative 1.4 percent return. Given all of the recent market ups and downs, especially considering the hits REITs have suffered, this figure is far better than average. We have performed extensive research on Terreno’s advantage over other Industrial REITs in our Q2-2015 Industrial REIT Ranking. The company is leading our ranking operationally, however not in yield or valuation criteria. Download our report for free.

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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