Brad’s Note: Today, I’m passing the reins over to one of my senior analysts, Stephen Hester.
Stephen is a certified financial analyst and has worked as a director in the hedge fund industry, focusing on due diligence and risk management. He also has a history of triple-digit gains during periods of market volatility.
His expertise in income and unique take on investment strategies make him the perfect addition to our team here at Intelligent Income Daily.
Today, Stephen brings a new spin on one of our favorite investments, including one stock he thinks is particularly well-equipped to help you take advantage…
The stock market is supposed to protect and grow your money, at least over the long term. But sometimes, things go wrong.
Today’s unexpectedly high Consumer Price Index (CPI) number is one timely example. It shows that inflation rose 8.3% since last August. This showed the pressure on consumers is ongoing and sent the stock market tumbling down again.
It’s times like these when you need “insurance.”
Over the past few years, rising inflation and reckless government spending have pumped the brakes on economic growth. And that’s impacted personal portfolios… and retirement plans.
At Intelligent Income Daily, it’s our goal to help you find the best income opportunities. That way, you can safely and reliably grow your wealth, regardless of market conditions.
And today, I’ll tell you how not owning this one sector can cost investors a lot of money, especially in times like these when inflation runs rampant.
How It All Started
For centuries, the wealthy, elite, and Wall Street investment firms have turned to top-quality commercial real estate to generate outsized returns.
That’s only natural. According to Forbes (and plenty of others), it builds wealth more consistently than any other asset class.
So in 1960, Congress created a new sector in the market to help individual investors – like us – accomplish the same thing from real estate.
If you read yesterday’s article, you’ll know I’m talking about real estate investment trusts (REITs).
Thanks to REIT stocks, you can invest in real estate without expensive broker commissions, late night calls from tenants, or being a plumber on the weekends.
But many investors still aren’t aware how profitable and diverse REIT investments can be…
Up until 2016, REITs were tucked away in the financial sector, and only industry insiders knew much about them. Once they became their own sector, they’ve gotten more popular – and grown better over time.
Back in 2000, most REITs owned office, residential, and retail properties. Think corporate headquarters, apartment buildings, and outlet malls.
But by May 2022, the sector evolved to include billions of data centers, self-storage facilities, and distribution centers.
Odds are the email provider you’re using at this very moment stores its information with a data center REIT like Iron Mountain (IRM) or Digital Realty Trust (DLR).
See, that’s the beauty of REITs – real estate evolves with the rest of the economy. And thanks to their expansion and diversification, REITs are positioned at the heart of it all.
Our REIT Strategy
Along with evolution, REITs also provide insurance. They’ve been a proven hedge against inflation. And there’s a simple reason how…
The rise in rents, which is how REITs make money and fund dividends to investors, consistently beat inflation.
According to Cushman & Wakefield, REITs see a 1.1% increase in total returns for every 1% increase in inflation.
And according to the National Association of REITs, REIT dividends alone have outpaced inflation based on the Consumer Price Index (CPI) in all but two of the last 20 years – a 90% win rate. Plus, REITs outperformed the S&P 500 over the past 25 years.
So they don’t just survive when inflation hits – they outrun it.
Our Wide Moat Research team specializes in the nuts and bolts of each property type. And we use that knowledge plus our market experience to act on the best opportunities.
Thanks to their diversification and durable dividends, we can pick and choose the best REITs for various market conditions.
For example, we limited exposure to the retail and hotel sectors going into the pandemic. Instead, we doubled down on data centers, self-storage, and industrial REIT property sectors.
And that proved to be a great decision. Self-storage alone outperformed the Russell 100 by 164% since the start of the pandemic through the end of Q2 2022.
We believe this deep understanding of each type of REIT is critical to navigating and profiting from the next crisis.
Right now, the Vanguard Real Estate ETF (VNQ) is a good way to own a basket of REITs. Its 3.01% dividend yield is double the S&P 500’s 1.5%.
But as mentioned above, there are some REIT sectors primed to outperform, regardless of whether today’s inflation-fueled recession is mild or severe. In the coming weeks, we’ll share more details on what they are… and the best plays tied to them.
Happy investing,
Stephen Hester
Analyst, Intelligent Income Daily