In this article, we shall discuss the top 10 REIT stocks under $10.
With no end in sight to the ongoing global macroeconomic crisis, the stock market and industries all over the world are incredibly distressed. Supply chain disruptions exacerbated by Russia’s invasion of Ukraine and central banks tightening their monetary policies have resulted in global economic expansion projections declining to 3.2% in 2022, according to a report by Bloomberg. According to the latest economic outlook report by the Organization for Economic Cooperation and Development (OECD), inflation is the worst it has been since the economic depression of the 1980s. The report suggested that global economic activity shall remain downcast for the rest of 2022. According to the report, 2023 will see a massive drop of $2.8 trillion in the global GDP. This will lead central banks to further tighten their monetary policies in an effort to reduce inflation and introduce measures which could topple several major economies into a major recession.
In this situation, investors are searching for safe options to shield themselves from the rising inflation and interest rates. REITs are under investors’ radar amid all of this. Although certain REITs, such as mortgage REITs, are susceptible to interest rates and macroeconomic influences, other REITs like ones that invest in infrastructure, retail chains, and healthcare are relatively less turbulent and have significant defensive properties which make them a safe and stable investment opportunity.
Some of the most prominent players in the REIT sector are Realty Income Corp. (NYSE:O), Simon Property Group (NYSE:SPG) and American Tower Corp. (NYSE:AMT). In this article, however, we shall be going over the top 10 REIT stocks, priced under $10, to buy.
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Our Methodology
For this article, we tracked the data of over 895 hedge funds for the second quarter of 2022. From this data, we picked 10 top REIT stocks with a share price of $10 or less. The price of each stock was noted on September 27.
The stocks have been ranked based on the number of hedge funds which hold stakes in them, from lowest to highest.
Top 10 REIT Stocks Under $10
10. SITE Centers Corp. (NYSE:SITC)
Number of Hedge Fund Holdings: 16
Share Price (As of September 27): $9.92
Based in Beachwood, Ohio, SITE Centers Corp. (NYSE:SITC) is a publicly traded real estate investment trust that invests in shopping centers. As of December 2021, the company owns more than 200 shopping centers in the United States. As of the second quarter of 2022, Israel Englander’s Millennium Management is the largest stakeholder in the stock, having a stake value of $20.32 million.
On September 25, Mizuho analyst Haendel St. Juste upgraded Site Centers to Buy from Neutral with a price target of $17, up from $15. The analyst cited the company’s core growth, signed pipeline, minimized leverage and opportunistic balance sheet. Q2 2o22 earnings were strong for the shopping center REIT stock, with the company posting an EPS of $0.27 in the second quarter of 2022, beating estimates of $0.04 by $0.23. Furthermore, Site Centers posted a revenue of $140.7 million. The analyst believes Site Centers’ (NYSE:SITC) portfolios, with a strategy geared towards defense and a focus on internal growth, hold the highest chances of outperformance as recession risk intensifies.
9. Summit Hotel Properties (NYSE:INN)
Number of Hedge Fund Holdings: 16
Share Price (As of September 27): $7
Based in Austin, Texas, Summit Hotel Properties (NYSE:INN) is a leading publicly-traded lodging real estate investment trust focused on high-end, deluxe hotels. As of the second quarter of 2022, investor interest in Summit Hotel Properties increased, with 16 hedge funds long the stock, compared to 15 in the preceding quarter. Citadel Investment Group is the largest shareholder in the stock, having stakes worth $14.04 million. The preferred dividends have a coverage ratio of more than 500% based on Q1 2022 earnings.
The company’s performance has undergone a continuous improvement during Q2 2022, with the stock digesting a large acquisition of a 27 hotel portfolio for $777 million. This acquisition will contribute to the financial results which will be posted for the third quarter. Though the company is not as big a player as Realty Income Corp. (NYSE:O), Simon Property Group (NYSE:SPG) or American Tower Corp. (NYSE:AMT), the recent improvement in Summit’s (NYSE:INN) Q2 2022 performance, and the favorable projections for Q3 2022, make it one of the best bets in the REIT sector.
8. The GEO Group Inc. (NYSE:GEO)
Number of Hedge Fund Holdings: 17
Share Price (As of September 27): $7.38
Headquartered in Boca Raton, Florida, The GEO Group Inc. (NYSE:GEO) is a publicly traded company which focuses on the development, construction, and investment in private prisons and mental health facilities all over the world. The GEO Group Inc. has also curated programs to reduce recidivism, facilitating prisoners in returning to civilian life by providing therapy, life skills courses, job training, and housing assistance.
GEO Group has managed to maintain investor interest in Q2 2022, with 17 hedge funds long the stock. Mason Capital Management is the largest shareholder in The GEO Group Inc., having a total stake value of $38.16 million. The company has refinanced its debt, leaving ample room for a dividend payment or share buyback program. The impressive financial position of the stock, the ability to commence a share buyback program, and the resolve to pay dividends, make GEO one of the best real estate stocks to buy.
7. CoreCivic Inc. (NYSE:CXW)
Number of Hedge Fund Holdings: 17
Share Price (As of September 27): $8.89
Based in Brentwood, Tennessee, CoreCivic Inc. (NYSE:CXW) is a company which owns and operates private prisons and detention centers. As of 2022, it is the second largest private corrections company in the United States, managing more than 65 state and federal correctional and detention facilities.
Investors should not be misled by the company’s dismal history concerning stock returns, considering the fact that the real estate trust’s negative history was due to CoreCivic’s (NYSE:CXW) massive loans, which the company had not cleared timely. However, the company’s total debt has declined substantially, and debt maturities are still a long way into the future. Liquidity is significantly strong for the coming years. On September 1, it commenced an expansive share buyback program, with a yield of more than 15% as of Q2 2022. This will decrease share availability and is likely to boost the stock price.
Investor interest around CoreCivic Inc. increased in the second quarter of 2022, with 17 hedge funds long the stock. This was up significantly compared to Q1 2022, in which 15 hedge funds held stakes in CoreCivic Inc.. Mason Capital Management is the largest stakeholder in the stock, having a stake of $40.65 million. As of September 27, the company has a price-to-earnings ratio of 12.61.
6. Sunstone Hotel Investors Inc. (NYSE:SHO)
Number of Hedge Fund Holdings: 18
Share Price (As of September 27): $9.62
Sunstone Hotel Investors Inc. (NYSE:SHO) is a lodging real estate investment trust. The company pursues a strategy to create long-term stakeholder value through acquisitions and active ownership of hotels considered to be Long-Term Relevant Real Estate. Sunstone Hotel Investors’ (NYSE:SHO) hotels are primarily in the premium, 7-star segment, and operate under well-known, deluxe brands such as Marriott, Hilton, Hyatt, Fairmont, and Sheraton. The company beat EPS estimates of $0.06 by $0.09 in Q2 2022, posting an EPS of $0.15.
On August 11, Evercore ISI analyst Duane Pfennigwerth assumed coverage of Sunstone Hotel Investors Inc. with an Outperform rating and a price target of $13.50, down from $14. According to the analyst, lodging revenue is steadily returning to pre-pandemic peaks. Even though equity markets have grown increasingly cautious, the company’s fundamentals maintain the recovery trajectory, said Pfennigwerth. Moreover, the company has a reputation for maintaining an immaculate balance sheet, with the analyst contending that the decreased levels of debt make the risk/reward ratio of the preferred shares very impressive.
Just like Realty Income Corp. (NYSE:O), Simon Property Group (NYSE:SPG) and American Tower Corp. (NYSE:AMT), Sunstone Hotel Investors Inc. is one of the best REIT stocks to invest in in 2022.
Here is what Baron Funds had to say about Sunstone Hotel Investors Inc. in their Q2 2022 investor letter:
“Exceptionally strong leisure demand and the resumption of business travel are contributing to robust business fundamentals for the Fund’s hotel REIT investment in Sunstone Hotel Investors, Inc. (NYSE:SHO). Given that economic worries have now emerged, we are closely monitoring business fundamentals and our hotel REIT investments. At their current share prices, however, we believe the company is valued at steep discounts to replacement cost and our assessment of intrinsic value.”
5. AGNC Investment Corp. (NASDAQ:AGNC)
Number of Hedge Fund Holdings: 18
Share Price (As of September 27): $9.08
Based in Bethesda, Maryland, AGNC Investment is an internally-managed real estate investment trust. They invest predominantly in agency residential mortgage-backed securities on a leveraged basis, financed primarily through collateralized borrowings structured as repurchased agreements. AGNC Investment posted an EPS of $0.83 in Q2 2022, beating estimates of $0.59 by $0.24.
On August 8, Keefe Bruyette analyst Bose George upgraded AGNC Investment to Outperform from Market Perform, conferring a price target of $13.25.
Investor interest around AGNC Investment has skyrocketed in the second quarter of 2022, with 18 hedge funds long the stock, compared to 14 in the preceding quarter. Ken Griffin’s Citadel Investment Group is the largest shareholder in the stock, having a total stake value of $51.48 million.
4. Hudson Pacific Properties Inc. (NYSE:HPP)
Number of Hedge Fund Holdings: 20
Share Price (As of September 27): $9.83
Headquartered in Los Angeles, California, Hudson Pacific Properties Inc. (NYSE:HPP) is a real estate investment trust with an extensive portfolio and large investments in offices, sound stages, and other commercial property. Hedge fund sentiment around Hudson Pacific Properties Inc. grew more favorable in Q2 2022, with 20 hedge funds long the stock, compared to 14 hedge funds in Q1 2022. Balyasny Asset Management is the largest shareholder in the stock in Q2 2022, owning more than 2.51 million shares worth $37.19 million. Moreover, the company reported an annual dividend yield of 9.11% as of September 30.
On September 9, Morgan Stanley analyst Ronald Kamdem upgraded Hudson Pacific shares (NYSE:HPP) to Equal Weight from Under Weight, conferring a price target of $13 on the shares. The analyst ascertained that with shares down by more than 50% TTM in Q2 2022, the risk/reward ratio is perfectly balanced. Furthermore, Hudson Pacific Properties has an extensive portfolio of offices and shared working spaces which are currently occupied by some of the largest publicly traded technology and media companies in the world. For investors looking for an entry point into the tech or media sector, investing in the Hudson Pacific stock could be the perfect opportunity, as the company’s shares are one of the cheapest in the real estate industry, currently trading at $9.83 per share as of September 27.
3. RLJ Lodging Trust Inc. (NYSE:RLJ)
Number of Hedge Fund Holdings: 22
Share Price (As of September 27): $10.0
Based in Maryland, RLJ Lodging Trust (NYSE:RLJ) is a hotel investment company that owns premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels. The company owns over 96 hotels with approximately 21,200 rooms spread out over 23 states. As of the second quarter of 2022, RLJ Lodging Trust posted an EPS of $0.16, beating estimates of $0.1 by $0.06. The company also reported a revenue of $330.5 million in Q2 2022.
On August 7, Barclays analyst Anthony Powell lowered the price target on RLJ Lodging Trust to $15 from $18, keeping an Equal Weight rating on the shares. According to Powell, lodging REITs have already been priced in a typical downturn, which presents an excellent buying opportunity. The analyst admits that although a financial slump is possible due to the challenging macroeconomic climate, the company’s pent up convention demand sheds doubts on the likelihood on the slump. Shares of RLJ Lodging Trust have consistently generated a yield in excess of 7% in Q2 2022. These shares are perpetual, convertible, and not callable. As of the second quarter of 2022, Ken Griffin’s Citadel Investment Group is the largest shareholder in the stock, owning more than 3.93 million shares worth $43.32 million.
2. DiamondRock Hospitality Co. (NYSE:DRH)
Number of Hedge Fund Holdings: 22
Share Price (As of September 27): $7.35
Based in Maryland, DiamondRock Hospitality (NYSE:DRH) is a real estate investment trust. The company is self-advised and owns more than 33 premium destination resorts and hotels all across the United States. The company was named Global Listed Sector Leader by the Global Real Estate Sustainability Benchmark (GRESB), bagging the top spot in the Hotel Sector two years in a row for its impressive CSR program.
1. The Macerich Co. (NYSE:MAC)
Number of Hedge Fund Holdings: 23
Share Price (As of September 27): $7.73
Based in Santa Monica, California, The Macerich Co. (NYSE:MAC) is the third-largest, self-advised, real estate investment trust in the U.S, and invests primarily in shopping centers. As of September 27, the company has a market cap of $1.73 billion, and a price-to-earnings ratio of 32.2. Investor interest around The Macerich Co. has increased, with 23 hedge funds having a stake value of $105.57 million in Q2 2022. This is up from 20 hedge funds having a stake of $160.26 million in Q1 2022. AQR Capital Management is the largest shareholder in the company as of Q2 2022.
Macerich’s (NYSE:MAC) portfolio comprises a variety of premium-quality assets at very low valuations, which in turn opens up an excellent opportunity for investors eying the real estate sector. The variation and quality of the company’s portfolio incentivizes investors who can afford the risk. With one of the lowest valuation multiples in the industry, the company is set to accomplish its expansion objectives by 2025. It offers significant current income with a 5.2% dividend yield as of Q2 2022, and substantial potential for price appreciation. With a dividend yield of 5.2% and an increased possibility for share price appreciation, the risk/reward ratio is on the upside.
Here is what Smead Capital Management had to say about The Macerich Co. in their Q2 2022 investor letter:
“Leading the downside were stocks we own tied to any economic optimism. Warner Bros. Discovery (WBD) suffered selling from AT&T (T) shareholders disposing of it upon distribution of the shares in the merger. We have been too optimistic about how long it would take for these uninterested parties to sell. The Macerich Company (NYSE:MAC) suffered from fears of what a recession and higher interest rates would do to their business, disregarding the recovery in the Class “A” mall space since 2020.”
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This article is originally published at Insider Monkey.
