3 REITs That Are Incredibly Oversold Right Now

It's not easy to be the salmon that swims upstream when all around you, the other fish are going the opposite way. In stock market investing, that's known as taking the contrarian approach because you believe that the market has gone too far to one extreme or another where everyone else is doing the same thing.

The vast majority of investors now seem to be selling, and that can create a market condition in which stocks become technically "oversold." In technical analysis, a strategy that is usually best for short-term trading rather than long-term investing, various momentum indicators like the 14-period relative strength index (RSI) and fast stochastics are at extreme points, which could indicate they are soon due for a reversal.

Real estate investment trusts (REITs) have been battered down again by higher interest rates, inflation, war and now street talk that's shifted from "soft landing" recession to "hard landing" recession. REITs have been selling off in droves over the past few days as a result. Any 14-period RSI below 30 is considered to be oversold and a stochastic reading below 20 is said to be oversold. 

But take a look at three REITs that are extremely oversold and could be primed for at least a short-term bounce, if not more.

CubeSmart CUBE is a Malvern, Pennsylvania-based self-storage REIT with 1,338 storage facilities across 41 different states and Washington, D.C. It had its initial public offering (IPO) in 2004 under the name U-Store-It. In 2011, it was rebranded as CubeSmart. Between 2012 and 2022, CubeSmart grew its funds from operations (FFO) per share by 242%. Its same-store occupancy rate was recently 92.1%.

On Oct. 24, Wells Fargo analyst Eric Luebchow downgraded CubeSmart from Overweight to Equal-Weight and reduced the price target from $46 to $37. On Sept. 18, Stifel analyst Steve Manaker, who has a Benzinga 82.4% accuracy rating, reiterated a Buy rating on CubeSmart with a price target of $50, a potential 42% increase from its recent closing price of $35.02.

CubeSmart pays a quarterly dividend of $0.49, and the $1.96 annual dividend yields 5.6%. Its dividend growth over the past five years is 53%.

CubeSmart has recently fallen from $46.27 to $35.02, and its RSI is at 24, while its stochastic is below 5. So, despite the downgrade this week, it's already at oversold levels.

VICI Properties Inc. VICI is a New York-based diversified REIT that specializes in owning and operating gaming, hospitality and entertainment properties. Its triple-net portfolio includes well-known Las Vegas hotels such as Caesars Palace, MGM Grand and the Venetian Resort.

VICI Properties formed as a REIT in 2017 and was a spinoff from Caesars Entertainment Operating Co. as part of a Chapter 11 reorganization. The IPO was held on Feb. 1, 2018. VICI Properties' portfolio consists of 54 gaming and 38 nongaming facilities, with 60,300 hotel rooms and over 500 restaurants, bars, nightclubs and sports books.

One reason VICI Properties has been able to hold its own despite the rising interest rates of the past year is that over 40% of its leases have 2% to 3% annual lease escalators for inflation. Investors were not as concerned about rising inflation impacting VICI Properties as with some other REITs. 

On Oct. 19, VICI Properties announced it had completed an acquisition of 38 bowling entertainment centers in a sale-leaseback arrangement with Bowlero Corp. The purchase price was $432.9 million, and the cap rate on the 25-year lease term is 7.3%.

Despite the positive news, VICI has recently fallen from $31.17 to $27.25, and its RSI was at 29 and stochastic at 5. VICI could be ready for a reversal.

Easterly Government Properties Inc. DEA is an office REIT that acquires, develops and manages Class A commercial properties and leases them solely to government agencies through the General Services Administration. Easterly Government Properties owns 90 properties across 26 states. Its occupancy rate is 98%, and its weighted average lease term (WALT) is 10.4 years.

Easterly has been on an acquisition spree recently. On Oct. 5, it announced the purchase of a 97,969-square-foot Department of Homeland Security facility in Atlanta and a 95,273-square-foot specialized facility in Anaheim, California. On Oct. 23, it announced the acquisition of a 35,005-square-foot U.S. District Courthouse in Newport News, Virginia.

Easterly pays a quarterly dividend of $0.265 and the annual $1.06 dividend yields 10.1%. But the payout ratio is now at 93%, so investors need to watch the next quarterly report carefully to see whether FFO is rising or falling. Its third-quarter operating results will be announced on Oct. 31.

After falling from $14.93 in early August to a recent close of $10.49, Easterly now has a 14-period RSI of 26.89 and a fast stochastic of 1.79. Easterly has fallen six out of the last eight trading days, so a rebound could be forthcoming.

Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it's too late. Benzinga's in-house real estate research team has been working hard to identify the greatest opportunities in today's market, which you can gain access to for free by signing up for the Weekly REIT Report.

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