Real estate sector stocks and other housing related stocks are struggling on the stock market. For the first time in about 50 years, says Realty Times, housing prices are actually dropping. This means that housing stocks and stocks related to the real estate market (like solar stocks) are taking a bit of a beating. Or even a big beating. But there is a silver lining -such a market often offers investing ideas and opportunities.
The Wall Street Journal points out that housing stocks are now available at bargain prices:
Generally, investors should be cautious about the real-estate sectors because they could have further to fall. But discerning and patient investors might be able to find some gems amid the wreckage.
And one of those bargains could be Simon Property Group (SPG), which also just so happens to be considered a green-friendly company. Simon Property Group is a member of the U.S. Green Building Council, and it is also a Real Estate Investment Trust (REIT). REITs can be great because they allow you to invest in real estate without having to put up the capital to actually buy real estate. And they trade on the stock market like other equities. SPG is a retail property REIT, which also probably accounts for its relatively stable fundamentals.
Simon Property Group is actually in a pretty good place. It's the largest REIT by market value, and enjoys heavy involvement in shopping malls and other retail space (as opposed to many holdings in the really hard hit residential market). SPG is one of the companies likely to recover. In fact, it's recovering now and moving up nicely.
And that is key. If you are planning on investing in the real estate sector, you need to look for strong fundamentals. How's the cash flow? Is the company heavily in debt? Is it likely that the investment will recover? And you need to realize that it might take 2-5 years for the recovery to manifest fully. So you will need to make sure that your investment portfolio can handle that sort of time commitment.
Bottom line: the Simon Property Group REIT could be a good choice. The fundamentals look good and the REIT is likely to make a comeback. Plus, it's fairly cheap right now.
Photo:Omni Nate, Creative Commons, Flickr
Disclosure: I own nothing listed above.