Two New REITs Just Earned Our Highest Grade

The old saying "sell in May and go away" appears to be alive and well.

This old Wall Street cliché has served investors well as a timing device in the past. This year is no exception.

Perhaps we should amend the cliché to sell everything except for REITs in May and go away.

Over the last five weeks, stocks have traded lower as traders position portfolios for what could be a wild and bumpy ride during the summer.

One of the few bright spots in the market during the same five weeks can be found in the REIT sector.

U.S. President Donald Trump appears to have the upper hand with respect to trade negotiations with China.

The strength of the U.S. economy allows for a tough stance on issues that have been outstanding for decades.

Of course, this does increase volatility in the market.

As is often the case, the market sells first and asks questions later.

There really isn't time or the inclination to dig deeper.

The big picture is that Trump's trade war very well may trigger an economic boom in this country over the long term.

But that benefit isn't going to help the market in the coming months.

It takes short-term pain for long-term gain.

About the only thing known for certain is more uncertainty.

That bodes extremely well for REITs going forward. Investors will seek stability and dividend stocks that will perform well during what might be a summer swoon.

In the last four weeks, one of the larger REIT ETFs is up 3% while offering owners a near 5% dividend to ride out the storm.

That might not sound like much, but it's great compared to a loss of 3.6% for the S&P 500 during the same period.

This is not the time to be taking excessive risk.

While a REIT ETF is certainly one option for investors looking for lower beta and dividends, there are more attractive alternatives with individual REITs.

Turning to the Money Morning Stock VQScore™, we found two new REITs that just received our highest ranking.

Here are they are...

The Two Best REITs to Buy Now, No. 2

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As a contrarian, I like to find value and opportunity in the outliers.

One REIT that hasn't participated in the May REIT rally so far is Hospitality Properties Trust (NASDAQ: HPT).

With its exposure to the hotel industry, investors are a bit more nervous about Hospitality Properties.

That's an inefficiency we can exploit with the VQScore.

The more important number for Hospitality Properties is the 8.3% dividend.

The reality for the company is more plausible than the market fiction.

Even with the trade war, domestic companies like Hospitality are poised to do well.

The U.S. economy is roaring - and will continue to do so if Trump succeeds in gaining key concessions from China.

That strength supports a higher stock price for Hospitality in addition to keeping the dividend at a high level.

This explains why Hospitality Properties just earned our highest grade - and why owning Hospitality Properties today makes a ton of sense.

The Two Best REITs to Buy Now, No. 1

Keeping with the contrarian theme, what can be more out of favor than retail?

Even before the trade war with China, retail was struggling under the weight of competition with Amazon.com Inc. (NASDAQ: AMZN).

In the REIT space, we can gain exposure to the beaten-down retail space without owning retail stocks.

A portfolio of brick-and-mortar malls like the REIT Brookfield Property Inc. (NASDAQ: BPR) may struggle in the near term, but according to VQScore, it offers tremendous value over the long haul.

Shares of Brookfield have taken a hit in the last month, trading lower along with the S&P 500.

Unlike the S&P 500, Brookfield pays a fat dividend of more than 6%.

Chaos in the retail space invites opportunity.

Malls certainly have to adjust to the new reality, and in the near term, a trade war with China may make goods more expensive.

That expense could result in lower sales to an already stressed group, but it doesn't really change the value of the underlying property.

The play in Brookfield is more about stock appreciation in a tight real estate market instead of the dividend.

Given the discount afforded by the May selling, the time to buy that potential appreciation is now.

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