This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Real Estate Is Amid 'Multi-Year Recovery'

NEW YORK ( TheStreet) -- Real estate stocks, excluding real estate investment trusts, are at the beginning of a powerful rebound, says Jeff Kolitch, manager of the Baron Real Estate Fund (BREFX). He favors Hyatt (H - Get Report) and Starwood (HOT - Get Report).

The mutual fund has returned 8% this year, better than 82% of its Morningstar peers. Over the past year, the fund has risen 23%, putting it in Morningstar's 8th percentile for real estate funds.

Welcome to TheStreet's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.

Real estate has had a tremendous run over the past year. What makes you think these stocks can go higher?

Kolitch: We are in the early stages of a multi-year recovery for both commercial and residential real estate. Demand trends are improving. Supply growth forecasts are very low. Cash flows are beginning to improve. And valuations are attractive across many sub-segments of real estate.

If that is the case, why are you underweight REIT stocks?

Kolitch: REITs are somewhat pricey at this stage. If you look at REIT valuations, including earnings and cash flow multiples, then you will see by historical standards they are expensive right now. And for that reason we have positioned our fund to be weighted more heavily in other areas of real estate that we think are more compelling at this time.

One real estate sector that you like quite a bit is senior-living operators like Brookdale (BKD - Get Report).

Kolitch: We believe senior-housing operators in the real estate landscape offer some of the most compelling valuations with some of the best growth prospects. The demographic trends in senior housing are very compelling. The senior population is growing at three times the rate of the overall population. Demand is beginning to pick up. Supply growth forecasts are very low at this stage and there are several different growth vehicles available to these companies.

You are also positive on hotel companies like Hyatt and Starwood. Is this a call on a pickup in business travel?

Kolitch: It's a call on both business travel and the transient consumer. We believe in the case of hotel C-Corporations that we are in the early stages of a very powerful recovery. If you look at supply growth over the past three years, it has grinded to a halt. In fact, commercial real estate supply growth, particularly in the hotel segment, is at its lowest point in 25 years. Demand has started to rebound both at the consumer and corporate level. Occupancy and rates are picking up as well, so it's an area that we also expect to be quite compelling for the next few years.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BKD $37.65 0.00%
H $58.70 0.00%
HOT $85.23 0.00%
SWK $95.41 0.00%
AAPL $123.25 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs