Investing in the stock market used to be relatively straightforward. But the rules have changed.
No longer can investors rely on fundamentals driven by the basic rules of the business cycle. Rising profits, followed by rising stock prices. Rinse, wash, and repeat. That's how money used to be made on Wall Street.
Instead, investors must now navigate what has essentially become a managed economy that's manipulated to avoid the pains that come with the ebbs and flows of the business cycle.
Central banks around the world have worked very hard to keep the bull market going with easy money policy. But those policies have resulted in some dire consequences.
Currently, we have historically low interest rates. That's at a time when asset prices (including the stock market) are inflated.
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The current bull market is now more than 10 years old.
One reason for the odd pairing of record stock prices and absurdly low interest rates is the expansion of passive investment strategies.
A dearth of selling pressure allows prices to rise unabated.
For those playing that game, it appears that all is well.
That may be true on the surface, but eventually the gig will end. And when it does, the rush to the exits could create the largest crash on record.
The risk of such an outcome makes buying into traditional stocks risky right now.
The bond market isn't much better.
Aside from appreciation that will come when the business cycle ultimately ends and rates move ever closer to zero, owning a bond offers such paltry income one wonders "Why bother?"
About the only game in town worth playing is the REIT market.
Huge dividends and appreciation from simple supply/demand factors make REITs extremely attractive today.
With the underlying construct of the market and economy unlikely to change in the near future, REITs offer a safe haven likely to last for the next few years.
And the timing is perfect...
Two new REITs have just received our highest Money Morning Stock VQScore™ ratings.
Here are the details on these "perfect grade" REITs...
Top REITs to Buy Now, No. 2
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The key to strong fundamentals is a strong outlook for the future. Nothing will destroy the value of a stock quicker than dim prospects for earnings and revenue growth.
With respect to REITs that pay high dividends like MGM Growth Properties LLC (NYSE: MGP) it is even more important that earnings and revenue are insulated from the risk of a recession.
Nothing is more insulated from a recession than sin stocks. Weather the economy is growing or contracting matters little when your business is gambling or other vices.
MGM owns and leases large-scale resort gambling destinations. Rain or shine, MGM Growth is going to do well.
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That means the current 6% dividend is safe for investors today.
In addition to that rich yield, investors in MGM Growth will likely see appreciation thanks to earnings and revenue growth due in large part to the consumer. Earnings alone are expected to jump 8% in 2020, after a 2% rise in 2019.
A strong job market and growing economy bode well for spending in the gambling space.
With a recession far on the horizon, MGM and its 6% dividend is a stock to own today.
Top REITs to Buy Now: No. 1
Another good sign for a fundamentally "perfect REIT" is stock performance. One of the best-performing REIT stocks in 2019 is office property REIT Corporate Office Properties Trust (NYSE: OFC).
What makes Corporate Office most attractive is the market it serves.
Catering to the government, specifically in the defense and national security space, Corporate Office is poised for significant growth going forward.
Cybersecurity and defense are huge growing areas of the government. Securing those contracts, Corporate Office looks to be a secure REIT investment today.
The company pays a dividend just over 3%. While that is not excessive, it is solidly above the going rates in the Treasury market.
Analysts do expect earnings to slip in 2020, but the reduction will likely not impact the dividend paid. Revenue is expected to grow 1.6% in 2019 and 2.8% in 2020.
For investors looking for appreciation and yield, Corporate Office is the name I would own.
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