Several low-priced real estate investment trusts (REITs) made huge moves higher this week, and many are in the office or healthcare subsectors.
Investors know that low-priced stocks can be volatile, and it’s as easy to lose as it is to gain a lot in the short term. These stocks are not for conservative investors or for people on a fixed income who cannot afford to take large risks with their capital.
But abrupt new moves in a low-priced stock often portend even more future gains to come. If an investor is patient and perhaps waits for a price pullback off a spike, it is possible to do quite well on these trades.
Take a look at three low-priced REITs that have blasted higher on increasing volume this week.
Diversified Healthcare Trust DHC is a Newton, Massachusetts-based healthcare REIT that owns 376 healthcare-related properties of approximately $7.1 billion across 36 states and Washington, D.C. In addition to over 100 life science and medical offices, Diversified Healthcare Trust also has 27,389 senior living community units in its portfolio.
In April, Office Properties Income Trust OPI announced it was acquiring Diversified Healthcare Trust in an all-share transaction. It seemed like a done deal because in May, Office Properties Income Trust began to implement the financing needed to complete the transaction.
On June 2, Diversified Healthcare Director Adam D. Portnoy purchased a total of 5,566,644 shares at an average price of $1.77 per share, for a total of $9.81 million.
However, on June 5, investment adviser firm Flat Footed LLC, a top shareholder with about 8% of Diversified Healthcare Trust, reiterated its intent to vote against the proposed merger. Flat Footed sent a letter to the Diversified Healthcare board asking for clarification of details of the merger — specifically why the board is willing to let Diversified Healthcare go for $1.13 per share after rejecting an all-cash $4 per share bid in 2022. The letter also asked why Portnoy was purchasing Diversified Healthcare stock at $1.77, well above the merger price.
Diversified Healthcare shares rose quickly after this was announced and are up 37.28% over the past three days. Its most recent closing price was $2.32.
Uniti Group Inc. UNIT is a Little Rock, Arkansas-based specialty REIT that acquires and constructs mission-critical communications infrastructure in the form of fiber optics, copper and coaxial broadband networks.
Uniti Group owns and operates 137,000 fiber route miles covering 275,000 commercial buildings, with most of its network in the Eastern and Midwestern portions of the U.S. It’s one of the 10 largest fiber providers in the U.S. today, and its fiber optic leasing generates about 70% of its total revenue.
Analysts have been tepid on Uniti Group recently. Morgan Stanley analyst Simon Flannery maintained an Underweight rating on Uniti Group on June 1, while lowering the price target from $7 to $6. On May 30, RBC Capital Markets analyst Bora Lee maintained a Sector Perform rating on Uniti Group but lowered the price target from $7 to $5.
But over three days this week, and without any news, Uniti Group has risen 11.86%. On Tuesday, it was 6.3% higher in the premarket and finished up 4.4% for the day. Its most recent closing price was $4.34.
Unity Group President and CEO Kenny Gunderman purchased 225,000 shares of Uniti Group at an average price of $4.37 in the first week of March, amounting to $983,250.
Perhaps investors are feeling more confident that the $0.15 per share quarterly dividend, or $0.60 annual per share that yields 13.82%, will remain intact. The next ex-dividend date is June 15.
City Office REIT Inc. CIO is a Dallas-based office REIT that owns 58 buildings totaling 6 million square feet. The REIT is focused on the Sun Belt region, West Coast and select areas in Florida.
On May 30, RBC Capital analyst Michael Carroll maintained a Sector Perform rating on City Office REIT but was more negative in lowering the price target from $10 to $7.
Nevertheless, City Office REIT is one of several office REITs that have seen huge price increases this week in a subsector that has had very little love from Wall Street for a long time. City Office REIT is up 9.7% this week.
Other low-priced office REITs picking up big gains this week are Brandywine Realty Trust BDN, up 10.71%, and Hudson Pacific Properties Inc. HPP, up 9.66% in three days. Office stocks were crushed between February and the end of May but have shown recent resiliency.
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