In this piece, we will take a look at the 11 best REIT stocks to buy under $10. If you want to skip our overview and introduction to the real estate industry then you can take a look at the 5 Best REIT Stocks To Buy Under $10.
The real estate industry has become one of the most watched sectors as of late. This is because of the current interest rate environment that has not only made financing new projects much more difficult, but it has also raised the bar for securing financing for pricey real estate purchases such as a home. At the same time, real estate firms that rely on debt financing for managing their existing portfolios also feel the pressure since their interest rate payments rise.
While these are broader trends that end up affecting the real estate industry - and by extension, real estate stocks - 2024 is also seeing the sector continue to navigate the aftershocks of the coronavirus pandemic. The pandemic ushered in the trend of working from home, and even though lock downs and other restrictions are a thing of the past, companies are still struggling to convince their employees to return to the office.
In fact, the disruption in real estate has been so severe that it's hit the most consumer facing section of the industry perhaps the hardest. This segment covers real estate agents, who act as facilitators between real estate sellers and buyers, with data from Alignable showing that small business real estate companies, that are primarily run by their owners themselves are in trouble. As of December 2023, nearly half or 45% of this segment had trouble paying their rent, and to make matters worse, higher interest rates are also drying up the real estate business. This is because mortgage rates, which are used as the primary means of home financing in the USA, have continued to hover around 7% and made home buying difficult for a lot of homeowners.
This means that real estate stocks aren't generating much confidence, a fact that becomes clear when we take a look at the performance of the Dow Jones U.S. Real Estate Index. The index is flat over the past twelve months and has ended up losing 78 basis points. Expanding this to cover the pre pandemic era, the five year performance of the real estate stock index has seen it generate just 24 basis points in share price appreciation.
However, this brief analysis excludes one of the biggest features of real estate stocks, and one that not only separates them from the broader stock market but also high growth industries such as consumer technology, enterprise computing, artificial intelligence, and semiconductors. A big category of real estate stocks belongs to real estate investment trusts (REITs), and these are special legal vehicles that are structured to allow them to pass the majority of their profits to investors as dividends.
In fact, Insider Monkey took a look at some such stocks last year as part of our coverage of 11 Best REIT Dividend Stocks and found that some of the top paying stocks included American Tower Corporation (NYSE:AMT) and Prologis, Inc. (NYSE:PLD). These are pure play industrial companies that target the highly lucrative technology and supply chain industries. American Tower is a data center real estate investment stock, that offers companies with space to house their computing facilities. On the flip side, Prologis caters to the needs of one of the most real estate heavy industries, supply chain and logistics. The latter needs warehouses, lots, and other facilities, and looking at the latest dividends of these REIT stocks, the two have yields of 3.62% and 2.90%, respectively.
With this backdrop, let's take a look at some of the top REIT stocks that hedge funds are piling into. In this list, the notable names are Service Properties Trust (NASDAQ:SVC), Brandywine Realty Trust (NYSE:BDN), and Hudson Pacific Properties, Inc. (NYSE:HPP).
11 Best REIT Stocks To Buy Under $10
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Our Methodology
To make our list of the best REIT stocks, we ranked the 37 biggest REIT stocks in terms of market capitalization and with a share price less than $10 by the number of hedge funds that had bought the shares as of Q4 2023 end. Out of these, the top REIT stocks were chosen.
For these best REIT stocks, we hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Uniti Group Inc. (NASDAQ:UNIT) is a specialized REIT that caters primarily to the needs of the telecommunications industry. February 2024 has been an important financial month for the firm that has seen it beef up cash by selling assets and gaining a new credit facility.
By the end of 2023's final quarter, 17 out of the 933 hedge funds tracked by Insider Monkey had held a stake in the firm. Paul Singer' Elliott Management was the biggest Uniti Group Inc. (NASDAQ:UNIT) investor due to its $58.4 million stake.
Just like Brandywine Realty Trust (NYSE:BDN), Service Properties Trust (NASDAQ:SVC), and Hudson Pacific Properties, Inc. (NYSE:HPP), Uniti Group Inc. (NASDAQ:UNIT) is a top REIT stock under $10 that hedge funds are buying.
Chimera Investment Corporation (NYSE:CIM) is an American real estate investment trust headquartered in New York City. It is primarily a mortgage asset manager backed by residential and commercial properties. While Chimera Investment Corporation (NYSE:CIM) trades for just $4, more than half of the shares are owned by institutional investors, lending the stock some stability.
As of Q4 2023 end, 19 out of the 933 hedge funds part of Insider Monkey's database had bought and owned Chimera Investment Corporation (NYSE:CIM)'s shares. Dmitry Balyasny's Balyasny Asset Management was the firm's biggest investor due to its $15.7 million investment.
Medical Properties Trust, Inc. (NYSE:MPW), as the title suggests, is a healthcare focused REIT that owns more than four hundred hospital properties, making it one of the biggest REITs of its kind. However, the stock is rated Hold on average, and the average analyst share price target is $5.
During last year's final quarter, 18 out of the 933 hedge funds profiled by Insider Monkey were the firm's shareholders. The largest Medical Properties Trust, Inc. (NYSE:MPW) stakeholder out of these is Philippe Laffont's Coatue Management courtesy of its $33.4 million stake.
LXP Industrial Trust (NYSE:LXP) is an industrial REIT headquartered in New York City. It's one of the stronger performing REIT stocks on our list, as the firm has beaten analyst EPS estimates in three out of its four latest quarters. While REITs are also evaluated by their payout ratios and other metrics, the EPS beats underscore the strength of LXP Industrial Trust (NYSE:LXP)'s markets and management even during an era of high interest rates.
Insider Monkey took a look at 933 hedge fund portfolios for 2023's fourth quarter and found 19 LXP Industrial Trust (NYSE:LXP) investors. Eduardo Abush's Waterfront Capital Partners was the biggest hedge fund investor as it owned $34.5 million worth of shares.
Industrial Logistics Properties Trust (NASDAQ:ILPT) is a logistics focused REIT that owns properties such as warehouses. Like other industrial REITs, it is also performing well on the financial front by having beaten analyst EPS estimates in three out of its four latest quarters.
During December 2023, 20 out of the 933 hedge funds covered by Insider Monkey's research had held a stake in the firm. Industrial Logistics Properties Trust (NASDAQ:ILPT)'s largest stakeholder in our database is Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management due to its $9.3 million investment.
Seritage Growth Properties (NYSE:SRG) is a diversified NYC based REIT. It's one of the more interesting REITs on our list, as when opposed to more traditional retail REITs, Seritage Growth Properties (NYSE:SRG) offers its customers the ability to customize their locations. The stock has posted modest returns this year, and the shares are up by nearly 2% year to date.
By the end of last year's fourth quarter, 20 out of the 933 hedge funds profiled by Insider Monkey had invested in Seritage Growth Properties (NYSE:SRG). Karim Abbadi and Edward Mcbride's Centiva Capital owned the biggest stake that was worth $19.7 million and came through 2.1 million shares.
Service Properties Trust (NASDAQ:SVC), Seritage Growth Properties (NYSE:SRG), Brandywine Realty Trust (NYSE:BDN), and Hudson Pacific Properties, Inc. (NYSE:HPP) are some top hedge fund unit REIT stock picks.
