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Farley: Five REITs With Solid Foundations

It's still risky to place aggressive bets on a recovery in the residential- and commercial-building segments, but one related group is perking up nicely this summer. Real Estate Investment Trusts (REITs) have come off deep lows in recent months, with many grinding out bullish basing patterns and setting up for major breakouts later this year.

As we know, this was an extremely hot group during the real-estate bubble. It turned south along with construction stocks in early 2007, but has held up much better in the last year-and-a-half. This resilience is paying off now, with capital reentering the sector at a healthy pace in hopes the dark days has finally past.

The great variety of REITs makes them an attractive choice for investors seeking exposure to this bear-market group, but also wanting to avoid the most dangerous segments, like residential construction. The hefty dividends commonly paid by these issues also help to alleviate the anxiety of ownership.

I've scanned my databases and uncovered five REITs with excellent price patterns. None of today's list is tied to residential construction, even though I'm pleasantly surprised by the recent performance of this sub-group. It just makes sense to stick with strongest sector components, given all the economic uncertainties.

Digital Realty Trust
Click here for larger image.
Source: eSignal

Digital Realty Trust (DLR - Get Report), paying a 2.90% dividend, is a northern California company focusing on technology-related real estate. It rallied to a new high at 42.86 in May 2007 and then pulled back. The stock found support in the low 30s, rallying back to resistance in November and May of this year.

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