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 Welltower Inc. (NYSE:WELL) 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.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
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).
A real estate broker standing in front of an outpatient medical property.
Welltower Inc. (NYSE:WELL)
Number of Billionaire Investors: 8
Number of Hedge Fund Holders: 44
Welltower Inc. (NYSE:WELL) is the world’s pre-eminent residential wellness and healthcare infrastructure company. Wells Fargo upped the price objective on the company’s stock to $158 from $140, keeping an “Equal Weight” rating. The firm noted that it announced a large portfolio acquisition with Amica, demonstrating the continued opportunities in the senior housing transaction market. Welltower Inc. (NYSE:WELL) highlighted that the communities will join the top echelons of the Welltower portfolio, demonstrated by their location in the most desirable neighbourhoods in all of Canada and their ultra-luxe amenities and finishes.
Amidst rapidly growing demand and limited new supply, Welltower Inc. (NYSE:WELL) expects the portfolio to drive outsized revenue and cash flow growth over the upcoming years. The stable Amica assets have showcased strong pricing power with RevPOR growth even surpassing Welltower Inc. (NYSE:WELL)’s overall SHO portfolio over the previous 5 years. Elsewhere, Scotiabank analyst Nicholas Yulico upped the price objective to $166 from $165, keeping an “Outperform” rating. The analyst opines that the company’s C$4.6 billion Amica Senior Lifestyles Canadian portfolio acquisition reflected its ability to get top-notch-quality senior housing portfolios at an attractive discount.
Baron Funds, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“We initiated a new position in Welltower Inc. (NYSE:WELL), which owns and operates senior housing and medical office buildings in the U.S. and internationally. We believe that operating fundamentals in the senior housing industry will continue to be robust, and Welltower is well positioned to capture both a cyclical and secular inflection in growth during the coming years. If occupancy of the company’s units were to return to levels achieved before the pandemic, we believe that senior housing cash flow would grow by more than 50%. In addition, we believe that there is further structural upside opportunity to both occupancy and operating margins by enhancing asset management, employing proprietary data analytics, and introducing initiatives such as amenity-based pricing. We recently met with the entire Welltower executive team in our offices and came away encouraged by the multi-dimensional growth opportunities ahead. Welltower has recruited top senior executives from the multi-family housing market to execute and deploy various initiatives that they believe can drive profitability beyond what other industry participants have achieved.
In addition, the broader industry backdrop hasn’t been this favorable in many years. Underlying demand is supported by a demographics boom with the over 80 population projected to grow at a 4% to 5% CAGR over the next five years versus annual growth below 2% coming out of the Great Financial Crisis. Supply is expected to remain muted since construction starts are declining rapidly, current developer economics are no longer attractive and entitling and building a new project takes roughly five years. The current financing environment for senior housing remains capital constrained, with loans either coming due and/or interest rate caps coming off assets that were acquired during a period of low interest rates. We believe this should provide an active and growing external acquisition pipeline, where management can invest capital at an attractive “cost basis” below replacement cost. Lastly, we believe that management, led by Shankh Mitra (CEO), John Burkart (COO), Tim McHugh (CFO), and Nikhil Chaudhri (CIO), are astute capital allocators focused on driving accretive value per share. Putting this all together, we see a path for earnings to more than double over the next five years, leading to attractive return prospects for the fund.”
Overall, WELL ranks 10th on our list of best real estate stocks to buy according to billionaires. While we acknowledge the potential of WELL 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 WELL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.