Smith likes Host Hotels & Resorts (HST), which owns upscale properties that operate under such brands as Ritz-Carlton and Four Seasons. He says the stock sells at a discount to the value of the assets. The company should report growing earnings as business travel increases in coming years.
Smith also owns Starwood Hotels & Resorts (HOT), which operates properties under such brands as Sheraton and Westin. Besides showing gains in the U.S., the company is expanding into the fast-growing markets of Asia.
Investors should also consider apartments, says Paul Curbo, manager of Invesco Real Estate Fund (IARAX), which has returned 11% annually during the past 10 years, outperforming 95% of competitors. Demand for apartments is growing as owners leave single-family homes to become renters. With bankruptcies and unemployment increasing in the last several years, 3.5 million households have moved from single-family homes to apartments, according to CoStar Group, a real estate tracker. "We are in the midst of a long-term decline in home ownership," says Curbo.
Curbo owns Equity Residential (EQR), which owns 152,000 apartments in 24 states. He also holds Essex Property Trust (ESS), which owns units in San Francisco and other markets where demand for apartments is strong.Another reviving area is the industrial sector, which includes warehouses that are used by retailers and other companies that need to store inventory. Warehouses have been benefitting from the continuing increase in global trade, says Brian Jones, manager of Neuberger Berman Real Estate (NREAX), which returned 5.3% annually during the past five years, beating 99% of competitors. Jones says the volume of trade moving in and out of U.S. ports has been increasing at a double-digit rate this year, an indicator that warehouses will enjoy rising demand. A favorite holding is AMB Property (AMB), which owns warehouses near busy airports and sea ports in cities such as Miami and Seattle. The stock pays a dividend yield of 4.3%. Another holding is ProLogis, a global warehouse operator that yields 5.3%. Not all real estate companies suffered equally during the downturn. Among the most resilient were operators of self-storage units, says Kelly Rush, manager of Principal Real Estate Securities (PRRAX), which returned 3.1% annually during the past five years, surpassing 87% of competitors. During boom times, demand for self-storage facilities increases as home owners have more stuff to keep. In recessions, demand remains healthy as people who lose their homes must find a place to temporarily store possessions. Rush holds Public Storage (PSA), which owns 2,100 self-storage facilities. "It is an efficient operator that is very savvy about developing new properties," Rush says.
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 + 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