Yahoo Finance 3 Top REITs to Buy as Inflation is Still Running Hot
January’s stock market gains reversed in February, and all three major bourses closed in the negative territory. The losses came as market participants feared that the Federal Reserve will continue to increase interest rates aggressively, thanks to the relentless rise in prices of indispensable goods and services in the beginning of 2023.
Inflation started showing signs of easing in the second half of 2022, but it came in hotter than expected in January. From fuel to gas to shelter, prices soared, lamentably, last month. The Labor Department added that the consumer price index (CPI) increased 0.5% in January, more than analysts’ expectations of an increase of 0.4%.
Similarly, the CPI notched an annual gain of 6.4%, also topping expectations. The core CPI too advanced 0.4% last month and 5.6% year over year, more than analysts’ respective estimates of 0.3% and 5.5%.
The U.S. Bureau of Labor Statistics, meanwhile, added that the producer price index (PPI) rose 0.7% in January, exceeding analysts’ forecast of 0.2%. On a year-over-year basis, PPI increased by 6% compared to a forecast of 5.6%. Additionally, core PPI, which excludes the volatile energy and food prices, saw an increase of 5.4% year on year, topping the estimate of 5.1%.
The Fed’s favored inflation gauge also remained stubbornly higher in January. Last month, the personal consumption expenditure (PCE) index rose by 0.6%, higher than the 0.2% increase in December. Likewise, the PCE index increased by 5.4% year over year in January from December’s annual gain of 5.3%. The core PCI also increased and all the readings were more than estimated.
Now, with inflation remaining elevated and the Fed hell-bent on quelling inflationary pressure, things may not look encouraging for the broader stock market. However, some stocks stand to gain from a rise in inflation.
Real estate, for instance, is an obvious choice. After all, with a rise in inflation, property prices move northward. And with an increase in property prices, the amount charged by landlords as rent also increases, , resulting in higher rental income. Real estate, by the way, can be acquired through investments in a real estate investment trust (REIT).
Thus, amid such inflationary pressure, one should consider investing in the following three REITs that carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Broadstone Net Lease BNL primarily buys and manages single-tenant commercial real estate properties.
BNL’s expected earnings growth rate for the current year is 5.7%. Its estimated earnings growth rate for next year is 2%. BNL’s shares have outperformed the Zacks REIT and Equity Trust – Residential industry so far this year (9.5% gains versus 5.5%).
NexPoint Residential Trust NXRT is engaged in acquiring, owning, operating, and selectively developing multifamily properties. It operates primarily in the Southeastern United States and Texas.
NXRT’s expected earnings growth rate for the next five-year period is 8%. Its shares have already gained 18.1% over the past five years. NXRT’s shares have outperformed the Zacks REIT and Equity Trust – Residential industry on a year-to-date basis (up 11.3% versus 5.5%).
Elme Communities ELME is a multifamily real estate investment trust that owns and operates apartment homes principally in the Washington, DC metro and the Sunbelt.
ELME’s expected earnings growth rate for the current year is 12.5%. Its estimated earnings growth rate for next year is 2%. Shares of Elme Communities have gained 4.5% so far this year against the Zacks REIT and Equity Trust - Residential industry’s gain of 5.5%.
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NexPoint Residential Trust, Inc. (NXRT) : Free Stock Analysis Report
Broadstone Net Lease, Inc. (BNL) : Free Stock Analysis Report
Elme Communities (ELME) : Free Stock Analysis Report
