In the world of stock market investing, taking the contrarian approach often means swimming against the current of popular sentiment. It’s about recognizing when the market has gone to extremes, diverging from the crowd, and finding opportunities. Right now, there are three Real Estate Investment Trusts (REITs) that appear to be incredibly oversold, potentially offering investors a chance to capitalize on a short-term bounce or more.
1. CubeSmart (NYSE:CUBE)
CubeSmart, based in Malvern, Pennsylvania, operates 1,338 storage facilities across 41 states and Washington, D.C. This self-storage REIT, formerly known as U-Store-It, rebranded itself as CubeSmart in 2011. Over the past decade, CubeSmart has shown impressive growth, with a 242% increase in funds from operations (FFO) per share. Currently, it maintains a same-store occupancy rate of 92.1%.
Despite recent downgrades, CubeSmart remains a compelling option for investors. On October 24, Wells Fargo analyst Eric Luebchow downgraded the stock, while Stifel analyst Steve Manaker reiterated a Buy rating on September 18, predicting a potential 42% increase in price from its recent closing of $35.02. CubeSmart offers a quarterly dividend of $0.49, with an annual yield of 5.6% and a five-year dividend growth of 53%.
CubeSmart has experienced a significant drop, falling from $46.27 to $35.02. Currently, its 14-period RSI stands at 24, and its stochastic reading is below 5, indicating oversold conditions.
2. VICI Properties Inc. (NYSE:VICI)
VICI Properties, based in New York, is a diversified REIT specializing in gaming, hospitality, and entertainment properties. Its portfolio includes famous Las Vegas hotels such as Caesars Palace, MGM Grand, and the Venetian Resort. VICI Properties emerged as a REIT in 2017, with its IPO taking place on February 1, 2018. An attractive feature of VICI Properties is that over 40% of its leases have 2% to 3% annual lease escalators, which help protect against inflation-related concerns.
Despite the positive news, VICI Properties has seen a decline from $31.17 to $27.25, with an RSI of 29 and a stochastic reading of 5. These indicators suggest that VICI may be due for a reversal.
3. Easterly Government Properties Inc. (NYSE:DEA)
Easterly Government Properties is an office REIT focused on acquiring, developing, and managing Class A commercial properties exclusively for government agencies through the General Services Administration. It owns 90 properties across 26 states, boasting an impressive 98% occupancy rate and a weighted average lease term (WALT) of 10.4 years.
Easterly has been actively expanding its portfolio, with recent acquisitions including a Department of Homeland Security facility in Atlanta and a specialized facility in Anaheim, California. Furthermore, on October 23, it announced the acquisition of a U.S. District Courthouse in Newport News, Virginia.
Easterly pays a quarterly dividend of $0.265, resulting in an annual yield of 10.1%. However, it’s important to note that the payout ratio is now at 93%, necessitating close monitoring of the next quarterly report to assess FFO trends.
After a fall from $14.93 in early August to a recent close of $10.49, Easterly currently holds a 14-period RSI of 26.89 and a fast stochastic reading of 1.79, suggesting a potential rebound.
In conclusion, these three oversold REITs, CubeSmart, VICI Properties, and Easterly Government Properties, may present opportunities for investors looking to take a contrarian approach and capitalize on their short-term or long-term potential.
