Market Insights

We’ve talked about boring stocks like health-care and consumer products. But those are pretty exciting compared with the best performing sector yesterday.

Yep, we’re talking about real-estate investment trusts (REITs). These companies own shopping centers, apartment buildings and warehouses… things that many clients would shrug at rather than trade. They were so dull that no one even thought to give them their own sector until a few years ago.

But they have a few things going for them in this volatile market. First and foremost, they benefit from lower interest rates because they’re dividend plays. Second, they’re mostly domestic. Third, they don’t export or import items that could get snarled in trade wars.

SPDR Real Estate ETF (XLRE) with 100-day moving average and new high for year ShowMe

Investors sifting through REITs may find the diversity of businesses surprising:

• Wireless cell-phone tower companies are REITs? Check out American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC).
• There are also health-care and retirement-home companies like Welltower (WELL) and HCP (HCP).
• You also have storage companies like PublicStorage (PSA), Extra Space Storage (EXR) and CubeSmart (CUBE).
• Some even operate cloud-computing facilities: Digital Realty (DLR), Equinix (EQIX) and CyrusOne (CONE).
• Then of course there are plenty of shopping centers, office buildings, industrial facilities and apartments.

REITs are interesting because they give retail investors access to the kinds of assets that were once only available to big institutions like insurers or pension funds. The law requires that they distribute the bulk of profits via dividends.

In conclusion, for years income investors mostly settled for utilities, telecoms and consumer staples. But now REITs have come into their own as a sector and seem to be grabbing attention as sentiment gravitates toward safe havens.