Goldman: Buy AvalonBay Communities

NEW YORK ( TheStreet) -- AvalonBay Communities ( AVB) shares jumped Wednesday morning while Starwood Hotels & Resorts Worldwide ( HOT) edged slightly lower after analysts at Goldman Sachs ( AVB) offered mixed broker action on the real estate stocks.

Goldman analyst Steven Kent downgraded shares of Starwood to a buy rating, removing the hotel operator from its prestigious conviction buy list.

Kent cited Starwood's valuation, pointing out that its stock has appreciated more than 60% from a year ago.

Starwood shares were 0.5% lower at $60.24.

Goldman analyst Jonathan Habermann issued an upgrade on AvalonBay shares to buy from neutral.

He also boosted his price target on AVB from $98 to $121, implying a 10.8% upside to the stock's Tuesday closing price of $109.16.

Habermann attributed the upgrade to AvalonBay's reasonable valuation as it compares to other REITs. He noted that AvalonBay should benefit materially on strengthening in the current rent cycle.

AvalonBay shares added 2.2% to $111.58 ahead of midday.

Habermann downgraded healthcare REIT HCP ( HCP) to neutral from buy, maintaining a $33 price target.

He cited fair valuation on the stock given its rotation in shorter lease-terms with greater near-term growth profiles.

HCP lost 1.4% to $35.88.

Elsewhere in the REIT space, Annaly Capital Management ( NLY), -- a buyer of mortgage-backed securities structured as a real estate investment trust -- saw a sizeable uptick in short interest on the New York Stock Exchange at the end of 2010.

Short sellers borrow a company's shares in the hope they will drop in price. They can then buy them at the lower price to return the shares to the lender, while pocketing the difference. The New York Stock Exchange reports its 100 most-shorted tickers twice a month with several days lag time.

Annaly's shares were roughly flat over the past year. However, its dividend yield of more than 14% has been a big draw for investors.

Anally Capital shares edged 0.2% lower

-- Written by Miriam Marcus Reimer in New York.

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