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2 Must-Have Stocks For 2024 2 Must-Have Stocks For 2024

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As someone deeply involved in the world of REIT analysis, most of my investments land in the REIT sector (VNQ). It’s a place of comfort and understanding, but I’m not one to shy away from the other tempting sectors of the market.

I’m a firm believer in the power of diversification – the only “free lunch” that the market offers. And boy, do I hate missing out on free lunch; it’s against my principles, you know?

I’m drawn to non-REIT investments that still have a real estate flavor because that’s my bread and butter, my jam, my cup of tea, you name it.

Let’s dive into two of my favorite non-REIT stock investments for the promising year of 2024:

Tricon Residential (TCN)

On the surface, Tricon may appear to be a REIT, but it’s not. It’s an asset managing maverick that’s all about specializing in single-family rental investments and playing the game of earning fees for managing capital for others. It also puts its money where its mouth is, heavily investing alongside other players to get a slice of that lucrative returns pie.

What really gets my blood pumping is the fact that this company is up for grabs at a jaw-dropping discount to its net asset value.

Would you believe it? The company’s latest NAV estimate stands tall at $14.09 per share, yet it’s chilling at just $9 in the market. That’s like getting a steal at 65 cents on the dollar for an interest in a diverse portfolio of single-family rentals and its asset management business. We’re talking about a bargain of the century here, folks!

And that’s not all – Land & Buildings has thrown its weight behind Tricon, initiating a position and shouting from the rooftops about the opportunity that smacks you in the face. You think I’m kidding? Here, take a look at their presentation by clicking here.

For those of you who’ve just emerged from under a rock, Land & Buildings is the Godzilla of activist investment firms specializing in listed real estate securities. We don’t always see eye-to-eye with all their moves, especially when it comes to the short side, but generally speaking, they know a thing or two about sniffing out the undervalued real estate deals and dragging management to unlock the next jackpot. One word: impressive.

Take it from someone who’s been in the trenches with them before – their sights are set on Tricon, and it’s déjà vu. Tricon and American Campus Communities are like two peas in a pod.

  • Both are all about the residential properties vibe.
  • Both have assets that are attracting private equity players like bees to honey.
  • Both hold the keys to significant value-add potential that only private players can unlock.
  • Both are waving around massive discounts to their net asset value like nobody’s business.
  • Both are or were on the radar of activists who wouldn’t take no for an answer.
  • And here’s the kicker – both have caught the eye of Blackstone (BX), the heavyweight champ of private equity players.

Wait, it gets even juicier. Remember when Blackstone swooped in and nabbed American Campus Communities? Yeah, speak of the devil, they’ve already flashed the cash with a $300+ million investment in Tricon, snagging about 12% of the company’s market cap and even securing a front row seat on the board. From where I’m standing, they’re not messing around.

Blackstone has been flexing big time, growing its portfolio of single-family rentals and flashing the big bucks with a $6 billion portfolio purchase in 2021 at a ~3.5% cap rate. And today, Tricon is flaunting a 6.5% implied cap rate, even with its rents sitting pretty below market levels. Talk about a diamond in the rough!

Land & Buildings did some digging and found out that the true cap rate is closer to 7%, a figure that would make your traditional single-family rental deals in Tricon’s sunbelt markets bow down in awe. Recent single-family rental transactions have been reported at 4.5-5%. Someone pinch me, please!

By taking a more conservative standpoint with a 5.5% cap rate, Land & Buildings believes that Tricon is loaded with a whopping 65% upside potential, and they’ve got a roadmap to crack this treasure chest wide open.

They’re banking on a simple rent hike to market levels to unlock a delicious 20% in earnings growth. And wait for it – trim the fat by axing excessive overhead and BAM! Another 30% in earnings jumps out like a jack-in-the-box. Tricon’s G&A shot through the roof as they aggressively grew their portfolio in recent years, but times have changed, and the costs can be slashed. And if that still doesn’t do the trick, then buybacks or a full company sale will leave no stone unturned in the value unlocking mission. Ka-ching!


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