Building Your Portfolio With Real Estate

Commercial real estate services firm CB Richard Ellis Group (CBG Quote) also gets some interest from the guru strategies. The O'Neil strategy likes it because its price is nearly at its 52-week high, it has little debt and its return on equity is 33.4%. The strategy I use based on Peter Lynch's writings favors CB Richard Ellis because its P/E/G ratio (P/E relative to growth) is a very desirable 0.42. A P/E/G of 1.0 or less is acceptable and less than 0.5 is great.

Jones Lang LaSalle (JLL Quote) is a real estate services firm that has the attention of both the Lynch and O'Neil strategies. The O'Neil strategy is impressed that the company has shown consistent earnings growth (earnings have increased in each of the past five years), its stock is within 5% of its 52-week high (the strategy looks for stocks within 15% of their 52-week highs) and its relative strength, a measure of how well a stock has performed relative to the market, is a strong 90. The Lynch strategy is happy to see Jones' P/E/G ratio be an impressive 0.33.

Arbor Realty Trust (ABR Quote), a REIT, is favored by the Lynch strategy because of its low P/E/G (0.40), solid EPS growth rate of 27.2% (based on the average of three-, four- and five-year historical growth rates) and modest P/E (10.76). The O'Neil strategy likes its stock price, which is a few cents below its 52-week high and the fact that earnings have increased in four of the past five years.

I'm not saying any of these companies is likely to be the target of a takeover. But they are worth considering to buy because they are doing well. Plus, there is a lot of private-equity money in search of investments, with the real estate industry being in the sights of these private investors.