Real Estate Stock-Picking: Hersha, Sunstone, Annaly

Editor's note: This was originally published on RealMoney. It's being republished as a bonus for TheStreet.com readers.

One of the most important tools in the investor's kit is a set of quantitative standards for measuring the health of a particular corporation's balance sheet and income statement. Too much emphasis is paid to the story of a particular company or the outlook for its business prospects. All too often, stories tend to have fictional elements to them, and the future is not predictable.

I realize that this flies in the face of typical Wall Street analysis with its carefully calculated forecasts. I find it hard at times not to laugh at all the well-educated men and women who believe their elaborate spreadsheets that predict earnings six or seven years out. They mean well, but the investing landscape is littered with these spreadsheets, and they are all pretty much worthless.

Opinions and forecasts are nice, but it is far more important to know how the health of a company is right now, and how well it is managing its business to produce profits right now. ...