We recently published a list of 10 Most Undervalued REIT Stocks to Invest In Now. In this article, we are going to take a look at where Starwood Property Trust, Inc. (NYSE:STWD) stands against other most undervalued REIT stocks to invest in now.
Where is the Real Estate Sector Heading?
According to the National Association of Realtors, sales of previously owned homes in February increased 4.2% from January while they were 1.2% lower year-over-year. Home buyers are slowly moving into the market although mortgage rates have not changed much. Although the market is still tight, it is witnessing more inventory and choices, with the inventory at February end standing at 1.24 million units thereby representing a 17% rise year-over-year. The tight supply is still driving home prices up since the median price of a home sold in the month of February was 3.8% higher, as compared to last year.
Lawrence Yun, NAR’s chief economist, previously appeared on CNBC to give insights on the state of the housing market. In his opinion, if inflation comes down due to deregulation policies despite the tariff conditions or more home construction occurs with the federal government opening up for more development, the market might see lower mortgage rates along with the Fed rate cut. Simultaneously, the Federal Reserve decided to hold the interest rates steady amidst uncertainties around tariffs.
Logan Mohtashami, HousingWire lead analyst, thinks the cure for tariffs is lower mortgage rates. In an interview with CNBC, he said that if mortgage rates go down and new home sales start to grow, the builder would find a way to sell homes and build homes. Although builder sentiment has recently fallen considering their profit margins are stressed amidst tariffs, this sentiment tends to increase with rates going down.
Our Methodology
In order to compile a list of the 10 most undervalued REIT stocks to invest in now, we first used a stock screener to shortlist REIT stocks trading at a forward P/E of less than 15, as of March 25. From this list, we selected the top 10 stocks with the highest number of hedge fund holders, as of Q4 2024. The 10 most undervalued REIT stocks to invest in now have been arranged in ascending order of the number of hedge funds that disclosed stakes in them at the end 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 sky high view of the corporate headquarters indicating the large scale of the company.
Starwood Property Trust, Inc. (NYSE:STWD)
Number of Hedge Fund Holders: 27
Forward P/E: 10.52
Starwood Property Trust, Inc. (NYSE:STWD) operates as a REIT focusing primarily on originating, acquiring, financing, and managing mortgage loans and other real estate investments in the United States, Australia, and Europe. It is organized into complementary business segments including Real estate commercial and residential lending, Real estate property, Infrastructure lending, as well as Real Estate investing and servicing.
Starwood Property Trust, Inc. (NYSE:STWD) is an affiliate of the global private investment firm, Starwood Capital Group. The firm differentiates from many of today’s market participants by leveraging the global reach and operating expertise of Starwood Capital Group. It is important to note that Starwood Capital Group is one of the largest institutional real estate investors globally with 32 years of experience and broad operating expertise across virtually every real estate asset class.
While other commercial real estate finance companies focus solely on specific sectors of the market, Starwood Property Trust’s multi-cylinder investment platform enables it to seek out investment opportunities across a broader universe. While the firm reported its results for the fourth quarter of 2024 for which it recorded a GAAP EPS of $0.15, the CEO Barry Sternlicht reiterated the strength of this low-leverage multi-cylinder platform which has allowed it to invest every quarter for 15 years despite volatile and disruptive market conditions, successfully deploying over $100 billion of capital. The REIT invested $1.6 billion in the quarter and $5.1 billion for the year 2024 and plans to raise its pace of investment in 2025.
Overall, STWD ranks 3rd on our list of most undervalued REIT stocks to invest in now. While we acknowledge the potential of STWD 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 STWD 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.
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