PINE - Mining For Small-Cap REIT Gems
2024-04-08 07:00:00 ET
Summary
- Large-cap REITs with healthy balance sheets and resilient business models are preferred in the current challenging macroeconomic environment.
- Small-cap stocks have the potential for faster appreciation but are currently facing challenges due to high inflation and rising interest rates.
- Despite the challenges, there are attractive small-cap REITs with strong balance sheets and growth potential, such as Armada Hoffler Properties, Whitestone REIT, and Alpine Income Property Trust.
This article was coproduced by Leo Nelissen.
Ever since the macroeconomic environment became challenging when rates and inflation started to become sticky, we have prioritized REITs with healthy balance sheets, resilient business models, and favorable volatility profiles.
These companies, more often than not, are large-cap companies. This includes Realty Income ( O ), Mid-America Apartment Communities ( MAA ), Prologis ( PLD ), and others.
Generally speaking, there are three major benefits of buying large-cap stocks (based on Investopedia findings):
- Large-cap companies are known for their transparency , making it easy for investors to access and analyze public information about them.
- These established and stable companies are often preferred by investors looking for consistent dividends , as they have often committed to high dividend payout ratios.
- Large-cap stocks are typically blue-chip companies that are at the peak of their business cycle phases, generating stable revenue and earnings . Due to their size, they tend to move in line with the market economy and are considered market leaders. This makes it also easier to predict what might happen to their stock prices during various economic cycles.