As I prepared for Thanksgiving this year, I didn’t hunt wild turkey on the plains, but rather sought a handful of Blue Chip REITs, to serve up for your portfolio.
Here are my notes – with straight-talking REIT investing principles, realities – and some bromides:
1. Well-capitalized balance sheets reduce a REIT’s exposure to interest rate movements.
2. Limited use of debt to finance acquisitions in recent years, combined with the low level of market interest rates, has pushed interest expense as a share of net operating income to the lowest on record, and has given companies a sound financial position to take advantage of investment opportunities that may arise in the years ahead – while also providing a solid cushion against rising interest rates or any unexpected future market developments. That’s a long sentence, worth re-reading.
3. Investors who diversify their portfolios have historically had a better chance of ending up with higher returns as diversification reduces portfolio volatility and mitigates losses from any one security or asset class.
4. REITs, as part of a diversified portfolio, offer a distinct asset class that demonstrates low-to-moderate correlation with other sectors of the stock market, as well as to bonds and other assets. In other words, REIT returns have tended to zig while returns of other assets have zagged, smoothing a diversified portfolio’s overall volatility.
5. REITs are great diversifiers because you can mitigate concentration risk geographically and by property sector because each property sector has its own economic headwinds and tailwinds (catalysts).
6. As a dedicated REIT analyst, my goal is to help you navigate these cycles to optimize performance, while always protecting principal at all costs.
7. The upcoming picks were selected, in part, due to their dividend safety, balance sheet strength, earnings growth, diversification and management – all important attributes.
8. These are blue-chip picks, from my slightly wider collection of “SWANs” – REITs that allow you to “Sleep Well At Night.” These come, one each, from the Mall, Healthcare, and Data Sectors; and two Triple Net Lease REITs.
9. Timeless wisdom should not be discounted, but rather, mined for gold. As a value investor, I agree with Benjamin Graham who summarized his philosophy by stating intelligent investing consists of analyzing potential purchases according to sound business principles. This includes an understanding of what you are doing, making your own decisions, ensuring that you are not risking a substantial portion of your original investment, and sticking to your own judgments without regard to market opinion.
10. As Mr. Graham wrote, “You are neither right nor wrong because the crowd disagrees with you. You
are right because the data and reasoning are right.”
11. Five Blue Chip REITs to feast on:
Mall REIT Simon Property Group (
Triple Net Lease REIT Realty Income (
Data Sector REIT Digital Realty Trust (
Triple Net W.P. Carey’s (
To follow the REIT industry every month, as I review over 150 choices, separating SWAN & victors, from, the, um, turkeys, across more than 17 sectors… subscribe to my newsletter, Forbes Real Estate Investor, please click here. Makes a great holiday gift!