Profit Like a Real Estate Mogul (Without Buying Property)

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Editor's Note: Bill Patalon's readers enjoy regular access to his high-profit research and best money-making, market-beating ideas. We're sharing Private Briefing with you today because it contains a play on the intersection of several current U.S. and global market trends. And where those trends meet, there's money to be made. Here's Bill…

With a 37% gain in The Blackstone Group LP (NYSE: BX) since late July, we've done really well with our targeted investment in real estate.

And with very quick gains of 9% in BRF SA (NYSE ADR: BRFS), 5.2% in South American agricultural play Adecoagro SA (NYSE: AGRO) and 1.6% in high-tech agribusiness player Neogen Corp. (Nasdaq: NEOG), we're doing well with our plays on (pockets of) accelerating U.S. inflation.

Today we're going to combine the two concepts and employ a very simple formula we believe will add to your profits.

The formula: Inflation + Real Estate = Cash in Your Pocket.

And we're going to recommend two stocks we expect will benefit from what we're seeing…

Rising Prices

As we detailed in several Private Briefing reports this month, food prices are soaring.

But as the latest U.S. inflation report demonstrated, it isn't just the zooming prices of tomatoes or lettuce that are kicking U.S. consumers in the keister …

It's also soaring rent costs.

Before you dismiss that as a non-issue, keep this in mind: The financial crisis and Great Recession of 2009 were touched off by a housing debacle and the subprime-mortgage crisis.

The fallout was deep – and lasting.

According to a brand-new story in U.S. News & World Report, home ownership rates fell from about 70% before the recession to a low of about 65% in the downturn's depths. And while record-low interest rates have helped bring folks back to the "I've got a job and a mortgage" world, the fact is that home ownership rates were still at a very low 65.2% as 2013 drew to a close.

In short, the Great Recession created millions of new renters.

And right now those renters are feeling the pinch.

Back in January – the newest figures available – rent for a mid-sized apartment was up an average of 3% nationwide on a year-over-year basis. That may not sound like much. But it's almost double the U.S. inflation rate of 1.7%.

And the story gets worse – much worse, in fact – if you look at the hottest markets.

Like tech-fueled San Francisco, for example.

And there's quite a story to tell.

Nothing But 'Net

Before the big tech bull market we're riding now (by "tech bull," I'm referring to all the growth and innovation – and not just stock prices), the last Silicon Valley surge was the 1999-2000 dot-bomb debacle. As the Internet burst on the scene as a new consumer venue, the sector got ahead of itself and imploded. The rate of growth – and, hence, the tech bull itself – just wasn't sustainable.

It took nearly a decade for the sector to get up a new head of steam. And the current bull market is sustainable, says in-house tech guru Michael Robinson.

"As your folks have heard me say, Bill, I think there's lots more room for this tech boom to run," he said. "We're talking about big convergences of major trends – with more to come, still. That'll fuel growth, wealth creation, and lots of new jobs for years to come."

When you create all those new jobs, all those folks have to live, eat, and sleep somewhere.

And lots of them rent.

Just look at what some experts have to say.

Join the conversation. Click here to jump to comments…

About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish… and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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  1. Fatimah Reichelderfer | May 1, 2014

    This really is such a fantastic post, and was thinking significantly the same myself. Another excellent update.

  2. Randy Berdy | May 1, 2014

    Straight towards the point and effectively written! Why can?t everyone else be like this?

  3. zabor ilenta | May 2, 2014

    Appreciate it for helping out, superb info. "If you would convince a man that he does wrong, do right. Men will believe what they see." by Henry David Thoreau.

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