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Specialized REITs: Value Drivers

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Jan. 12 2016, Updated 9:22 a.m. ET

What makes specialized REITs special?

The iShares Dow Jones US Real Estate ETF (IYR), the iShares Cohen & Steers REIT ETF (ICF), and the Vanguard REIT ETF (VNQ) provide investors with the opportunity to gain exposure to specialized REITs. Specialized REITs and residential REITs within IYR generated positive returns of 0.2% and 9%, respectively, on a yearly basis. Specialized REITs Extra Space Storage (EXR), CubeSmart (CUBE), and Public Storage (PSA) were the top performers on a yearly basis, with returns of 46.8%, 37%, and 31%, respectively.

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Specialized REITs trading above their moving averages

As shown in the table above, Extra Space Storage (EXR), CubeSmart (CUBE), and Public Storage (PSA) are trading above their 100-day moving averages by 13.2%, 12.6%, and 11.6%, respectively. Extra Space Storage, CubeSmart, and Public Storage are also trading above their 20-day moving averages, by 2.9%, 3.1%, and 1.5%, respectively.

The moving average indicates whether a security is entering a bull phase or a bear phase. It shows the average value of a security over a period. The data in the above table clearly shows the REITs entering a bull phase.

Analysts’ coverage

Wall Street analysts are quite optimistic about the performance of Extra Space Storage (EXR) and CubeSmart (CUBE) as 62% and 64%, respectively, made “buy” recommendations for the REITs. However, the view on Public Storage (PSA) is not as positive, with only 18% making “buy” recommendations.

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