Hedge funds are piling into real estate stocks. Case in point: Bally’s (NYSE:BALY), the company behind Chicago’s upcoming casino, saw its stock price surge over 28% this month after a buyout offer from its largest shareholder, hedge fund Standard General.
Meanwhile, according to a note from Goldman Sachs, hedge funds have increased their long positions (bets that prices will rise) on U.S. real estate investment stocks for the sixth straight week.
The renewed interest in real estate stocks comes as valuations of some commercial real estate assets have fallen, presenting potential buying opportunities for investors like hedge funds. The funds have purchased shares of stocks with diversified portfolios as well as those focusing on office space and specialized real estate holdings.
Interest rates seem poised to fall this year, and more investors will pile into REITs and real estate stocks as bond yields dry up.
Here are three top picks for real estate stocks for March.
Public Storage (PSA)
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Public Storage (NYSE:PSA), is a REIT specializing in self-storage facilities in the United States and Europe. PSA has interests in 3,028 self-storage facilities in 40 states, totaling approximately 217 million net rentable square feet.
For last year, PSA’s results were a mixed bag. For 2023, PSA reported a decrease in net income allocable to common shareholders by 53% to $1,948,741 from the previous year’s $4,142,288. However, its Funds From Operations (FFO) allocable to common shares slightly increased by 0.8% to $2,924,288.
Looking ahead to 2024, PSA has updated its earnings per share guidance to a range of $16.60 to $17.20, in comparison to the consensus estimate of $16.99.
PSA’s stock price sliding down around 6% over the past year to date has lifted its dividend yield to 4.11%.
Now could be a great time to invest in PSA, as its shares are undervalued when compared with its historical averages.
Equity Residential (EQR)
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Equity Residential (NYSE:EQR) primarily invests in residential properties in urban areas. Like other REITs, EQR has also been a relative underperformer in the equities market while investors’ attention (and dollars) have turned toward AI and other growth tailwinds. Its stock price has slid 0.44%, and it has a dividend yield of around 4.20%.
I like EQR due to a few factors, namely its dividend growth rate of 6% and the fact that earnings are set to grow in the future. Namely, its EPS forecast for next year is accretive, with analysts expecting a 7.58% growth rate.
Other factors that play in EQR’s hands are its very high gross margin of 63% and an even higher EBITDA margin of 69%.
REITS such as EQR will be the primary beneficiary of falling interest rates in the U.S. Therefore, investors should consider potentially undervalued firms like these for their dividend and capital appreciation potential.
SBA Communications (SBAC)
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SBA Communications (NASDAQ:SBAC) is a REIT focusing on wireless infrastructure. The firm operates a vast portfolio of nearly 40,000 cell towers across North America, South America and Africa.
For 2024, SBAC anticipates total revenues to range between $2,669 million and $2,709 million, with net income expected between $520 million and $565 million. This outlook builds on the progress it made last year, as SBAC reported a 4.3% increase in site leasing revenue, reaching $636.1 million for the fourth quarter, and net income growth of 6.7% to $109.5 million.
Meanwhile, analyst ratings for SBAC are generally positive, with 12 Wall Street equities research analysts giving it 11 buy ratings and one strong buy rating. Their share price targets range from $227 to $327, averaging at $271.50, suggesting a potential upside.
Wireless technology is perhaps an underappreciated supercycle by investors due to the late entry of 5G into the market. Buying shares of companies like SBAC now could then reap substantial returns later.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.