Dream stocks for real-estate investors
A stock screen and the wisdom of the crowd combine to identify a trio of companies that might shore up your portfolio's foundation.
This post comes from The Motley Fool's Dave Mock.
Investors are always hunting for the next big thing -- the dream stock that will soar into the stratosphere once the market discovers it.
MSN CAPS offers a variety of resources to help investors find tomorrow's leaders. The organizing principle behind the 160,000-member community is that collective estimates are often superior to the judgments of most individuals, and that a system that incorporates the knowledge, information and skills of the many can help individuals beat the market.
We used CAPS' handy stock screening tool to quickly find real-estate companies with a market value of at least $100 million, revenue growth of at least 30% over the past three years and shares trading at a price-to-earnings ratio of less than 25.
Then we tapped the collective intelligence of CAPS members to see whether the numbers tell the true story.
Our screen recently returned this trio of stocks:
E-House Holdings (EJ) is China's largest residential real-estate brokerage. Earnings have benefited from China's booming housing market, which some observers think has morphed into a bubble that will have to be managed via higher interest rates. Beijing has already instructed Chinese banks to raise mortgage rates to try to cool the market. The Shanghai company rates three stars at CAPS.
Gramercy Capital (GKK) is a real-estate investment trust that invests in commercial properties and loans secured by commercial properties. After reporting a fourth-quarter loss, the New York company said it was looking at the potential restructuring of the mortgage and mezzanine debt of its realty unit, Gramercy Realty. At CAPS, the company has a four-star rating.
Annaly Capital Management (NLY) is a real-estate investment trust that invests in and manages mortgage-backed securities. The U.S. response to turmoil caused by these instruments, including interest rates near zero and the bailout of Fannie Mae (FNM) and Freddie Mac (FRE), has buoyed Annaly. The stock has a 16.1% dividend yield. The New York company has a three-star rating at CAPS.
In the E-House
Fourth-quarter earnings more than quadrupled as revenue tripled at E-House. The company also gave upbeat guidance for 2010 and said it would start paying a dividend this year.
The steps China is taking to keep its booming housing market in check may dampen the explosive growth that E-House has seen, but many CAPS members expect it to benefit from the long-term growth of the Chinese economy. Of the 659 CAPS members rating E-House, 95% expect the stock to outperform the broader market.
The REIT deal
Gramercy Capital, which has tenants such as Bank of America (BAC) and Regions Financial (RF) among its properties, has seen its shares rise 211% over the past 12 months, far outpacing the Standard & Poor's 500 Index ($INX) over that period. But the slump in commercial real estate is taking a toll on the company's realty unit, which is expected to generate negative cash flow during the next 12 months.
The company said on March 15 that the nature of Gramercy Realty's portfolio and the terms of its loan restructuring had compelled it to hire EdgeRock Realty Advisors to help it evaluate "strategic alternatives" for the unit.
Still, 95% of the 270 CAPS members rating Gramercy Capital remain bullish on the stock.
The taxpayer fallback
Annaly Capital posted fourth-quarter earnings of $439 million, or 79 cents a share, up from $262 million, or 47 cents a share, for the same period in 2008, helped by strong growth in its interest-rate spreads.
While shareholders of Fannie Mae and Freddie Mac may bear plenty of risks, companies like Annaly that hold a portfolio of Fannie and Freddie securities backed by taxpayers are at least partially protected.
Annaly's dividend yield is another strong selling point for investors. Within the CAPS community, 88% of the 1,391 CAPS members rating the company think it will beat the broader market.
Individuals know best
The collective wisdom of a huge pool of investors can provide context for a page of numbers from a stock screen. But individual investors are still the best judges of what to do with their own money. So chime in with your opinion. If you agree that these companies present dream opportunities -- or see more of a nightmare instead -- share your thoughts. It can make a difference.
More from The Motley Fool:
| Tags: | CAPSChinareal estate |
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