(Top buy-rated real estate stocks for 2011 report updated with analyst upgrades to AvalonBay Communities.)
NEW YORK (TheStreet) -- Stocks in the
Morningstar ( MORN) noted that REITs have been catching on with a number of exchange-traded fund investors who consider them as potential hedges against inflation. The investment research firm pointed to inflows of $312 million to the iShares Dow Jones U.S. Real Estate ( IYR), and $371 million of net inflows to the Vanguard REIT Index ( VNQ) in the third quarter as evidence of the growing interest in REITs. REITs have a distinct advantage over broader market investing, Greg Genovese, president and CEO of Pacific Valley Realty Capital, told TheStreet recently. He said the group's rise is due in part to the equities' ability to generally offer better yields and cash flow than dividend-paying stocks. There is simply more demand for REITs nowadays as well, he said, and that demand continues to increase. McGrath said equity REITs stand to benefit in 2011 from "superior access to attractively priced capital" as fundamentals stabilize following the "sharp decline" the sector faced amid the Great Recession. She expects multifamily and hotel sector REITs to rebound with the strongest internal growth over the next two years, and advised REIT investors in 2011 "to focus on REITs and sectors that can deliver both core portfolio and external growth."