Latest Stock Buy or Sell? Make More Informed Decisions!
Today, The Panic-Proof Portfolio (Stockchase Research) and Andrew Moffs commented about whether CAR.UN.TO, TCN.TO, HOM.UN.TO, BPY.UN.TO, SMU.UN.TO, SPG, REI.UN.TO, KMP.UN.TO, MAC, GRT.UN.TO, COLD, ARE, ERE.UN.TO, CCI, XRE.TO, BEI.UN.TO, IIP.UN.TO, AP.UN.TO, GM, JPM, AMAT, ADI, COP, PHM, CWH are stocks to buy or sell.
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Stockchase Research Editor: Michael O'Reilly This well diversified US home builder will continue to benefit from 30 year mortgage rates near historic lows -- especially as pandemic driven demand continues. It is trading at 8.5 times earnings, and projected to be only 7 times next years earnings. It pays a small dividend that is backed by an 11% payout ratio. Analysts at Raymond James and RBC upgraded their outlooks to $60 and $53, respectively. We would trade this with a $35 stop-loss, looking to achieve $52 -- over 23% upside. Yield 1.18% (Analysts’ price target is $52.21)
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cap rate: For the last 2-3 years, the average cap rate in the US real estate was 5.5% vs. the 2.7% US treasury rate (3-year average). And now the latter has fallen to 90 basis points, so the cap rate is even more attractive. Apartments: The effect of record low interest rates is huge; financing rates for Canadian apartments in the last 6 months have fallen 100 basis points. Meanwhile, we're seeing record low cap rates in midtown Toronto. Retail: pre-Covid, e-commerce sales were already taking away from brick-and-mortar. Today, how can traditional retail survive? Be careful what retail REITs you buy. Office space: before Covid, businesses were already using less office space and will continue to be challenged even during the recovery. He sees less demand in the medium term.
It's still early to buy office space. AP has benefited a lot from a tight Toronto office market. But there's a lot of new space coming on market. AP's clients, like Shopify, have said they won't need office space, though he doesn't think Allied is at risk. However, this trend could dampen their asking rates in the future. AP has a great density story with lots of excess capacity to build, but entering a weaker office market, this timeline has been pushed out. Maybe the value is here long-term, but he'd steer clear of AP in the short term.
And REITs outside Canada? Always a good choice if you want broad exposure to Canadian real estate. CAP REIT is the biggest holding, which he really likes, as well as H&R and Riocan REIT (also likes it). However, XRE is concentrated in these names, so you may be better off picking specific names that offer better growth. To answer: Outside Canada, you can look at VNQ and IRR in the U.S. that covers the U.S. REIT market. The US REIT market has more specialized sectors, like towers and data centres.
A core holding of his. Offers great value and a 3.85% yield. They own only Dutch apartments and are the largest apartment landlord there. CAP REIT manages ERE.UN. They buy mom-and-pop operators in Holland, a great niche. Remember: Holland is one of the densest countries in the world. ERE can grow internally and by acquisition. Definitely a top holding.
Andrew Moffs
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Stockchase Research Editor: Michael O'Reilly This outdoor RV retailer was an early pandemic favorite, but its shares have slumped in the past three months, making this a good entry level. Recently released Q3 earnings were up 21% over the year and gross margins rose over 9%. EPS of $1.58 beat expectations by $0.41. Management raised its guidance for Q4 above the high end of the previous range. It trades at only 12 times PE, and only 7 times next year's expected earnings. The CEO themselves invested over $2 million at $29-$33 back in Aug and Sep. JP Morgan upgraded them in Sep to Overweight with a $40 target. It pays a great dividend backed by a 16% payout ratio. We would trade this with an $18 stop-loss, and upside target of $38. Yield 3.8% (Analysts’ price target is $38.00)