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Later today, the Federal Reserve is expected to cut its benchmark interest rate.
U.S. Federal Reserve Chair Jerome Powell has said that the central bank will continue to provide accommodation to help spur economic growth.
That sentiment comes at the same time the United States and China are set to restart negotiations on a possible trade deal.
Around the globe, interest rates are falling. The European Central Bank just cut rates once again and introduced new stimulus measures. Also, roughly $17 trillion in global debt now produces negative yields for investors.
The downtick in global rates has spurred increasing demand for non-interest producing assets like gold and silver.
Unfortunately, investors are once again ignoring and remain improperly allocated to one of the best assets to own with lower rates: real estate.
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To identify the top REITs to buy during a falling rate environment, I employ the Money Morning Stock VQScore™.
This proprietary rating tells us exactly when to buy, sell, and hold a stock. The system assigns every stock on our list with a rating of 1 to 4.9. The higher the rating, the more likely that the stock is poised to rally in the coming months.
And with interest rates set to dip again - and eventually into negative territory - I am going to unveil the top REITs according to the VQScore.
Top REITs to Buy, No. 3
Host Hotels & Resorts Inc. (NYSE: HST) is our first stock on the list of real estate stocks to buy. The hotel operator has grown its earnings by 67% over the last year, and its best days look to be ahead of them.
The company has extremely low debt-to-equity exposure compared to its competitors. Its diverse ownership of 84 hotels, includes the Ritz-Carlton, Marina Del Ray, the San Francisco Marriott Fisherman's Wharf, and the New York Marriott Marquis.
The firm also has a history of profiting from real estate transactions in active markets. It just closed a deal for six non-core hotels for $415 million. Those properties were the Scottsdale Marriott Suites Old Town, the Scottsdale Marriott at McDowell Mountains, the Westin Indianapolis, the Costa Mesa Marriott, the Atlanta Marriott Suites Midtown, and the Chicago Marriott Suites O'Hare.
The company has significant free cash flow to continue paying its steady 4.6% dividend.
And in the months ahead, I anticipate the stock will jolt past its 52-week high of $21.62.
Shares currently trade at $17.25.
But with a VQScore of 4.8 during a time of lower interest rates, this could press this stock to $25 per share.
That figure represents 45% upside over the next 12 months.
Top REITs to Buy, No. 2
Mack-Cali Realty Corp. (NYSE: CLI) is another REIT on our list with a perfect VQScore of 4.9.
And when you dig into the numbers, it's easy to understand why this stock is poised for big gains in the first half of 2020.
With a $2.1 billion market cap, Mack-Cali owns a top-performing real estate portfolio that includes Class A real estate, top office spaces, and luxury multi-family properties.
The company found itself locked in a long-term proxy battle with activist firm Bow Street. While the battle played out, a lot of investors tossed in the towel and failed to understand the upside.
Now that Bow Street has won the battle (and three director board seats in the process), the firm will explore its strategic alternatives. This could include an outright sale of underperforming assets or the entire company in order to bolster shareholder value.
We'll either see a sale or a sharp change in the direction of leadership to bolster the firm's bottom line.
With high-quality, cash-generating assets on the table, this company has the potential upside to hit $35 per share. That's all while it produces a yield of 3.7%.
That target represents upside of more than 63% from today's price.
Top REITs to Buy, No. 1
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.