Anthony Paolone is an Executive Director covering REITs and real estate service stocks in the equity research department of J.P. Morgan. Prior to joining the firm, Mr. Paolone was Co-Head of Real Estate Stock Research at CIBC World Markets and was an associate at Donaldson, Lufkin & Jenrette Securities Corp. and Prudential Securities.
His 2,412 word interview, exclusively in the Wall Street Transcript, looks at both the macro and specific economics of real estate assets:
“…If you see S&P 500 earnings continue to be revised down and interest rates remain low, then we think these stocks will actually do fairly well. And so it’s a bit driven by the macro in our view right now at the group level…But two areas I’d also point out that, at the margin, we’ve been a little bit more bullish on than we’ve been historically are the healthcare REITs and the triple net lease REITs.”
Among the REIT universe, Mr. Paolone indentifies the few that stand out for his recommendation:
“Another name that we like a lot on the residential side is American Homes 4 Rent (NYSE:AMH). What we like about that business is we think the single-family rental demand right now is very robust, especially when you think about outsized household formation compared against new construction of housing in the U.S. that’s less than the level of demand.
You’re actually underbuilding on the housing side, and the for-sale housing market really slowed through the course of 2018 and into 2019. We think that puts more folks into rentals longer, and we think that benefits American Homes 4 Rent quite a bit.”
The specific sweet spot includes several stand out stocks:
“AMH, Invitation Homes (NYSE:INVH) and Front Yard Residential (NYSE:RESI) in the public markets, are running with occupancy levels that are in the mid-90s, which is better than I think we all expected them to be at this point. Margins are into the 60s, which is reasonably close to where traditional multifamily margins are. I think in a broad sense the business models have proved to be quite viable, but we’re still in the early days, and there are still things to work out.”
Read the entire 2,412 word interview in the Wall Street Transcript to get the complete list of high performing REITs.