Interest rate fears have battered around stocks over the past week, and the Bricks and Mortar portfolio has not been immune to the volatility.
Real-estate-related stocks have been particularly hurt by rising interest rates. For homebuilders, the rising rates mean increased borrowing costs for potential buyers. For real estate investment trusts, higher bond yields are viewed as competitive to steady dividends.
Despite what the bears say, I believe higher interest rates are just a short-term hiccup for REIT stocks that own commercial real estate, because most of the quality names in the sector are still trading at
discounts to their private market values
. That's why I still believe office owner
(BPO) is a good bet.
The higher rates do, however, spell more immediate trouble for homebuilder stocks -- a main reason why I continue to have concerns about
(RYL - Get Report).
Despite some sharp moves in portfolio names, I'm maintaining my current ratings. Of the stocks in the Bricks portfolio, those offering the biggest upside from present levels are Macau casino developer
(MPEL - Get Report)
(HLT - Get Report)
Here is an update on where my picks stand.
Hilton's stock was the subject of a lot of buzz at the recent NYU Hospitality Investment conference in New York City. Joseph Greff, an analyst with Bear Stearns, said Hilton will be the best performer among hotel and gaming stocks over the next year. Look at the shareholder list for the company and you'll see Hilton is a top holding at both Wesley Capital and GEM Realty Capital, two of the smartest real-estate-focused hedge funds around.