We recently published a list of 10 Best Real Estate Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Realty Income Corporation (NYSE:O) stands against other best real estate stocks to buy according to billionaires.
In 2025, CBRE Investment Management sees the potential for global listed real estate to outperform broad equities and offer a differentiated total return as compared to the private markets. As per the firm, the listed real estate remains in the early days of a new upcycle, one where long-term yields remain range-bound, earnings continue to accelerate, listed capital market access remains abundant, and valuations can aid continued returns. In 2025, the listed real estate is expected to be characterized by accelerating organic earnings based on improved supply/demand throughout various sectors and access to capital supporting potential acquisitions and upside to estimates, among others.
Listed Real Estate- What’s Ahead?
CBRE Investment Management believes that a new cycle for listed real estate kicked off in Q4 2023 with the recognition of a pause in the rate hikes. The absence of hikes is expected to be powerful for listed real estate, even though there isn’t a strong fall in target rates themselves. Notably, real estate has performed well during periods of range-bound long-term yields. Over 2001-2007, the US 10-year bonds delivered between ~4% – 5%, and listed real estate managed to generate double-digit average returns. The investment firm also added that strong access to capital of listed real estate, versus more constrained private real estate participants, can be maintained moving forward.
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Improved Earnings Growth Expected in Real Estate Sector
CBRE Investment Management sees earnings accelerating into 2025 across the real estate sectors. Globally, it expects 5% earnings growth, which is around double that of 2024 levels. Broad-based strength remains visible, with private-pay senior housing continuing to capitalize on powerful demographics and data center growth accelerating with generative AI. Also, the cell towers continue to gradually recover from customer churn, and retail and net leases have been performing, thanks to supply/demand and their prevailing capital costs.
The investment firm opines that the total return opportunity for REITs remains compelling. The listed real estate provides a ~4% dividend yield, which remains competitive versus private real estate income. This dividend continues to grow and is based on the conservative payout level. Amidst moderating central bank target rates as well as range-bound long-term yields, the firm believes that listed real estate is expected to prosper.
Our Methodology
We used the Finviz stock screener and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies catering to the broader real estate sector. We also mentioned the hedge fund sentiment around each stock, as 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).
An expansive outdoor view of a skyline backed by residential complex, symbolizing the company’s real estate solutions.
Realty Income Corporation (NYSE:O)
Number of Billionaire Investors: 11
Number of Hedge Fund Holders: 36
Realty Income Corporation (NYSE:O) is a real estate partner to the world’s leading companies. The company’s expansion into Europe offers numerous potential benefits. It enables geographical diversification, reducing its dependence on any single market and potentially offsetting regional economic risks. This diversification can result in a more stable and resilient income stream over time. The European market can provide opportunities for higher cap rates in comparison to the saturated US market. Realty Income Corporation (NYSE:O) has been able to expand the average acquisition cap rates via investments in Europe.
Also, the private capital fund initiative by Realty Income Corporation (NYSE:O) can provide numerous advantages. It mainly addresses the challenge of accessing significant amounts of capital for the purposes of continued growth. By the creation of evergreen vehicle, Realty Income Corporation (NYSE:O) can improve its cost of capital over the long run, which remains important for REIT’s performance and ability to make acquisitions. The company’s deep access to capital, global reach for proprietary acquisition opportunities, and track record using predictive analytics tools in a bid to improve portfolio management capabilities demonstrate the inherent advantages of the company’s unique business model.
Parnassus Investments, an investment management company, released a Q3 2024 investor letter. Here is what the fund said:
“Realty Income Corporation (NYSE:O) is poised to benefit from lower interest rates. Because its commercial tenants are mostly on 10-year leases, the stock’s steady dividend stream is attractive in the current environment of slow deceleration in the economy with rates coming down. In this favorable backdrop, the company also continues to execute well.”
Overall, O ranks 4th on our list of best real estate stocks to buy according to billionaires. While we acknowledge the potential of O 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 O but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.