Total home sales in 2020 hit their highest level since 2006, driven by demand linked to the Covid-19 pandemic.
The National Association of Realtors reported on Friday that closed sales of existing homes rose 0.7% month over month in December to a seasonally adjusted annualized rate of 6.76 million units. Sales increased by 22% compared to December 2019.
While demand is high, there is a shortage of available housing, which is pushing up prices. At the end of December, only 1.07 million homes were on the market, down 23% from a year ago.
As a result of these developments, investors may be interested in finding opportunities among companies in the real estate sector.
By using the GuruFocus Fair Value Line, a unique new method of estimating the intrinsic value of a stock, investors can find potential value opportunities. Based on Peter Lynch’s popular value line, which compares a stock’s current price to the value of its earnings per share if it traded at a price-to-earnings ratio of 15, the GF value line takes into account more than the price when determining the value. It also takes into account a company’s historical price-earnings, price-to-pound, price-to-sell and free cash flow ratios of a company, an adjustment factor based on past returns and growth as well as future estimates of the performance of the company. the company.
Using the GF value row for Seritage growth properties (SRG, Financial) as an example, we can see that the stock is considered slightly undervalued. The stock price is represented by the blue line, while the solid black line shows past intrinsic values ââcalculated by the GF value line. The dotted portion of the black line illustrates estimates of future intrinsic value. The red and green bands delimit overvaluation and undervaluation respectively, with darker shades indicating larger deviations from intrinsic valuation.
As of January 22, the GuruFocus All-in-One Screener, a premium feature, revealed that real estate companies that were slightly undervalued had a GF price / value ratio of between 0.4 and 0.8, a growth in the revenue per share over 10 years. at least 6% rate and a predictability rank of at least one in five stars were Apollo Commercial Real Estate Finance Inc. (ARI, financial), CorEnergy Infrastructure Trust Inc. (CORR, financial), New England Realty Associates LP (NEN, Financial) and Starwood Property Trust Inc. (STWD, Financial).
Apollo commercial real estate financing
Apollo Commercial Real Estate (ARI, Financial) has a market capitalization of $ 1.63 billion; its shares were trading at around $ 11.62 on Friday with a price-to-earnings ratio of 50.52, a price-to-book ratio of 0.72 and a price-to-sell ratio of 6.71.
The New York-based real estate investment trust primarily creates and invests in senior mortgages, mezzanine loans and other commercial real estate debt investments secured by properties in the United States and Europe.
Based on a GF value of $ 14.99 and a GF price / value ratio of 0.77, the stock appears to be slightly undervalued.
GuruFocus’s review rating of 7 out of 10 also indicates undervaluation.
GuruFocus has rated Apollo Commercial Real Estate’s financial strength at 2 out of 10 thanks to the issuance of approximately $ 3 billion in new long-term debt over the past three years, although it is still at a level manageable. The company has also experienced a decline in revenue per share over the past five years.
The company’s profitability fared better, scoring 4 out of 10 despite margins and returns below more than half of its competitors. Apollo Commercial also has a moderate Piotroski F-Score of 5, which suggests trading conditions are stable, as well as a predictability rating of one star. According to GuruFocus, companies with this rank are reporting an average of 1.1% per year over a 10-year period.
Among the gurus invested in Apollo Commercial,
Jim simons (Trades, Portfolio) ‘Renaissance Technologies holds the largest stake with 0.27% of the outstanding shares. Hotchkis & Wiley and
Paul Tudor Jones (Trades, Portfolio) also hold the share.
CorEnergy Infrastructure Trust
CorEnergy Infrastructure Trust (CORR, Financial) has a market capitalization of $ 104.84 million; its shares were trading around $ 7.75 on Friday with a price-to-book ratio of 3.51 and a price-to-sell ratio of 3.83.
Based in Kansas City, Missouri, the energy infrastructure-focused REIT has assets leased to oil and gas operators.
With a GF value of $ 9.87 and a GF price / value ratio of 0.78, the stock appears to be slightly undervalued.
The GuruFocus rating rating of 9 out of 10 also leans towards an under-rating.
CorEnergy’s financial strength has been rated 3 out of 10 by GuruFocus. While the cash-to-debt ratio of 0.91 is higher than its industry, the Altman Z-Score of -3.72 warns that the company could be in danger of bankruptcy if it does not improve its liquidity situation.
The company’s profitability was rated 7 out of 10, thanks to an expanding operating margin. Its returns, however, are negative and underperform the majority of its industry peers. CorEnergy is also backed by a moderate Piotroski F-Score of 4, but the one-star predictability rating is under scrutiny due to the decline in earnings per share over the past three years.
Simons’ company owns a 5.55% stake in CorEnergy Infrastructure.
New England Real Estate Associates
New England Real Estate Associates (NEN, Financial) has a market capitalization of $ 184.46 million; its shares were trading around $ 50.50 on Friday with a price-to-earnings ratio of 43.46 and a price-to-sell ratio of 2.98.
The Allston, Massachusetts-based real estate company owns and operates apartment buildings, condominiums and commercial properties.
Trading with a GF value of $ 67.29 and a GF price to value ratio of 0.75, the stock currently appears to be slightly undervalued.
The GuruFocus review rating of 8 out of 10 also supports undervaluation.
Mitigated by low interest coverage, GuruFocus rated New England Realty’s financial strength at 2 out of 10. The low Altman Z-Score of 0.75 also warns that the company could be at risk of bankruptcy, especially since assets accumulate at a faster rate as income increases.
The profitability of the company fares much better with a score of 7 out of 10. In addition to an expanding operating margin, New England Realty is supported by returns that exceed about half of its competitors as well as ‘a high Piotroski F-Score which indicates that trading conditions are sound. Driven by steady profit and revenue growth, it also enjoys a 2.5-star predictability rating. GuruFocus claims that companies with this rank are reporting an average of 7.3% per year.
No guru currently owns the stock.
Starwood Real Estate Trust
Starwood Real Estate Trust (STWD, Financial) has a market capitalization of $ 5.49 billion; its shares were trading around $ 19.26 on Friday with a price-to-earnings ratio of 14.07, a price-to-book ratio of 1.21 and a price-to-sell ratio of 6.06.
Based in Greenwich, Connecticut, the REIT manages commercial mortgages and commercial mortgage-backed securities.
With a GF value of $ 23.91 and a GF price to value ratio of 0.81, the stock appears to be slightly undervalued.
GuruFocus’s review rating of 8 out of 10 also indicates undervaluation.
Starwood’s financial strength was rated 2 out of 10 by GuruFocus thanks to the issuance of approximately $ 4.8 billion of new long-term debt in recent years.
The REIT’s profitability was rated 4 out of 10. While its margins and returns surpass more than half of its industry peers, Starwood also has a low Piotroski F-Score of 3, indicating that trading conditions are in good shape. poor posture, as well as a one-star predictability rating.
Pioneer Investments (Trades, Portfolio) is the company’s largest shareholder guru with 0.04% of the shares outstanding.
Joel greenblatt (Trades, Portfolio) also owns the share.
Disclosure: No position.
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