REITs: An Overvalued Asset Class
I continue to believe that the bond conundrum is ending, and although I do not share the nearly consensus view that housing is a bubble, there could be a plateau. This is evident in housing stocks, which have
The combination of those valuations with the fact that the yield on the 30-year appears to be heading for 5% and higher in 2006 means REITs are vulnerable.
Therefore, I set my screens on the industry to identify companies that are at least 40% overvalued with hold-sell ratings according to my model. The result was clear: These nine REITs are overvalued and investors should be prepared to sell on strength. Some of these stocks have patterns similar to the housing stocks, and some had new 52-week highs just last week. Here are the names that should be sold on strength.
Arden Realty (ARI) owns and manages commercial office properties located in southern California. Its shares are 51.2% overvalued, with fair value at $30.24. The weekly chart profile is overbought with the five-week MMA at $42.93. My quarterly value level is $41.98 with the 52-week high set on Friday at $45.80. Shares were recently trading at $46.08. There are no risky levels for ARI, so additional new highs are feasible. The close for November will become an input to my model and I will follow-up with a risky level if one is generated.Crescent Real Estate Equities (CEI) owns and manages a portfolio of premier office buildings throughout the U.S. Shares are 44% overvalued with fair value at $14.14. The weekly chart profile is positive with the five-week MMA at $20.02 and the 52-week high at $20.82 set on Oct. 10. Friday's close was right on a monthly pivot at $20.36. My annual value level is $16.16 with a quarterly pivot at $21.35 and annual risky level at $27.27. Shares were recently trading at $20.42. General Growth Properties (GGP) has a diversified portfolio of properties throughout the U.S. They also develop and sell land for residential, commercial and master-planned communities. Shares are 140.5% overvalued with fair value at $18.55. The weekly chart profile is positive with the five-week MMA at $42.51 and the 52-week high at $47.48, set on Aug. 2. My annual value level is $28.45 with quarterly risky levels at $46.67 and $48.25. Shares were recently trading at $45.05. Macerich Co. (MAC) owns and leases regional and community shopping centers throughout the U.S. Shares are 53.1% overvalued with fair value at $43.65. The weekly chart profile is positive with the five-week MMA at $63.91 and the 52-week high at $71.22, set on Aug. 3. My annual value levels are $45.33 and $43.31 with quarterly risky levels at $72.73 and $76.15. Shares were recently trading at $66.68.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV