When the Fed released the minutes from April’s meeting last week, very few equity REITs have passed unscathed. Only 11 out of the 170 REITs had a positive return. The average return of the equity REITs we track was down almost 3%. Tuesday and Wednesday were the worst days, but the market appeared to be calmer on Thursday and Friday, accustomed to the possibility that interest rates might go up next month.
Even a brief market ‘tantrum’ like the one we just saw provides insights into how investors are perceiving REITs and which sectors are considered more vulnerable. In fact, lodging was the most affected sector, falling on average almost 7%. For those who follow this blog, this doesn’t really come as new news.
Concerning last week’s stock performance, some patterns have repeated from previous selloffs. Among all equity REITs, lodging stocks occupied the bottom positions. Also, among lodging stocks, the Ashfords (Ashford Trust and Ashford Prime) have been one of the worst performers. Finally, among all sectors, lodging stocks now have on average the highest dividend yield, surpassing the diversified group of stocks.
Although lodging encompasses a wide range of high yield stocks and presents several good options to invest in, investors remain concerned. After reaching a peak, the sector’s growth rates might not be sustainable. Following several lodging selloffs, time has shown that this is not their turn to shine.
Looks like that self-storage has begun to experience the same situation. Together with lodging and regional malls, self-storage was one of the worst performing sectors. Good growth rates and overpriced stocks have made investors ask the same questions. Only time will tell if self-storage will undergo several selloffs, as well.
Disclaimer: This is not a recommendation to buy or sell stocks. The highest-yield stocks are not necessarily the best portfolio investment choice. The purpose of this report — which is essentially a snapshot of information available on May 20, 2016 — is to reduce your stock analysis by enabling you to compare stock and sector performance. Please do your own due diligence before making any investment decision.
As of April 29, 2016, the equity REITs are constituent companies of the FTSE NAREIT All REITs Index. Companies whose equity market capitalization is lower than $100 million have been disregarded.
This report 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. 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.