REITs Investing: The Only Logical Way to "Bottom Feed" in Housing
By Bryan Bottarelli
In this article
Not one single analyst on TV will tell you to “buy” the housing sector right now.
U.S. home prices fell 1.4% in the first quarter compared with a year earlier.
This is the first year-over-year decline in national home prices since 1991.
REITs Investing: The Only Logical Way to “Bottom Feed” in Housing
There's not a single analyst on TV that'll tell you to “buy” the housing sector right now - and one-sided situations like this always make me wonder if there's an opportunity that the herd is missing.
The short answer is “yes.”
There is an opportunity that's being overlooked - and our WaveStrength Options Weekly members will get the full run-down in tonight's newest alert.
As a little back-drop, the topic of the financial media today is (once again) real estate - and everywhere you look the news continues to get worse and worse.
A year ago, for example, home prices were rising at an 11.5% pace. But today, the S&P/Case-Shiller index reported that U.S. home prices fell 1.4% in the first quarter compared with a year earlier.
This is the first year-over-year decline in national home prices since 1991 - and on the heels of this release Goldman Sachs economists reiterated their forecast of home prices falling 5% in 2007.
It's easy to see this weakness in the top homebuilding stocks. Over the last 12 months, Toll Brothers Inc. (TOL:NYSE) is flat, Lennar (LEN:NYSE) is down 8% and DR Horton (DHI:NYSE) is down 15%.
And when you look at the one-year performance of the PHLX Housing Sector Index (HGX:PHLX), which is a basket of the top homebuilding names in the sector, you'll see that this basket is flat compared to the Dow's 20% gain.
The HGX is an obvious market under-performer. But here is the interesting part…
When you compare the performance of the homebuilding stocks versus real estate investment trusts, you get an entirely different story.
In fact, if you compare the one year performance of the Dow versus REITs like Boston Properties (BXP:NYSE), Vornado Realty Trust (VNO:NYSE), and Host Hotels & Resorts (HST:NYSE) - you'll see that this group has collectively gained 19% compared to a 12-month flat line of homebuilding baskets like the HGX.
As you can see, this collection of REITs is a much better group to own -and now that the news flow tells you that real estate “blood” is running in the streets, it just might be the time to get positioned in longer-dated calls.
In today's WOW alert, we'll be using this media-induced weakness to establish a longer-dated upside position in a collection of REITs while prices are nice and cheap.
Based on our calculations, an 11% up-move in this REIT basket can equate to a 92% gainer over the next 8-12 weeks - so we'll be issuing this latest recommendation in tonight's newest WOW alert.
This play represents the only logical way to “Bottom Feed” in today's real estate market, and WOW members will get the full run-down tonight.
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Bryan Bottarelli is the head trading tactician for the WaveStrength Group, and is a contributing editor for Taipan Financial News. Coming off the floor of the Chicago Board Options Exchange (CBOE), Bryan uses WaveStrength chart forecasting to develop wining options plays for his service called WaveStrength Options Weekly. Bryan is also the lead editor of BottarelliResearch, an elite membership service that he independently publishes himself.
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