We recently compiled a list of the 8 Most Undervalued REIT Stocks To Buy Now. In this article, we are going to take a look at where Apple Hospitality REIT, Inc. (NYSE:APLE) stands against the other undervalued REIT stocks.
Historically, REITs are a major beneficiary of rate cuts. They tend to outperform markets if cuts are followed by a recession while they perform in line with the S&P in the case of no recession. Laurel Durkay, Morgan Stanley Investment Management head of global listed real assets, previously mentioned to CNBC that the REITs that are going to benefit the most from a rate cut would be net lease companies that would experience an improved acquisition spread and a better cash flow growth as a direct result of the rate cut.
Furthermore, REITs are more resilient as they continue to capitalize on the trends that persist regardless of the volatility in conventional real estate. For instance, data center REITs benefit from AI trends, health care REITs benefit from an aging demographic, and housing REITs benefit from the housing affordability issues persistent in the United States.
In recent news, Fed Chair Jerome Powell pointed towards further, smaller rate cuts saying that the Fed is not on any preset course. Two more rate cuts are to be witnessed this year in case the economy performs as expected. However, these cuts will be smaller and not as aggressive as the first half percentage point rate cut. The rate cut is taking center stage at the REIT conference in NYC, as reported by CNBC.
This rate cut is positive news for the REIT sector as seconded by Conor Flynn, CEO of Kimco Realty. In his opinion, the potential rate cut would change investor appetite in real estate investment trusts. He believes in a bright outlook for the sector and that the cut would benefit real estate in general as well as his business.
Our Methodology:
In order to compile our list, we first used stock screeners to identify REIT stocks that are trading with a forward P/E under 20, as of October 7. We listed stocks from all sub-segments of the REIT industry. From those, we picked the stocks which have the highest number of hedge fund holders. The 8 most undervalued REIT stocks to buy now have been ranked in ascending order of the number of hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Long exposure of a busy city skyline featuring tall roof tops of different hotel brands.
Apple Hospitality REIT, Inc. (NYSE:APLE)
Number of Hedge Fund Holders: 19
Forward P/E: 17.64
Apple Hospitality REIT, Inc. (NYSE:APLE) is the owner of one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the US. This portfolio comprises 224 hotels with over 30,000 guest rooms positioned in 87 markets across 37 states and the District of Columbia. The REIT was formed in 2007.
Apple Hospitality REIT, Inc. (NYSE:APLE) has a history in the lodging industry of over 20 years through its predecessor companies. The firm’s established portfolio shows that it invests in high-quality hotel properties that are situated in urban, high-end suburban, and developing markets and offer an attractive upside potential. Additionally, the firm has strong relationships with industry-leading brands since its portfolio has 119 Hilton-branded hotels, 100 Marriott-branded hotels, and five Hyatt-branded hotels.
For the second quarter ended June 30, comparable Hotels RevPAR increased 2.5% year-over-year. Comparable hotel occupancy was 80% thereby recording an over 2% increase since the preceding year. The steady improvement in midweek business travel demand is expected to be a major opportunity for driving growth. The strength of leisure travel demand was evident during the quarter from the growing occupancy on both weekdays and weekends.
Therefore, the fundamentals of the business of Apple Hospitality REIT, Inc. (NYSE:APLE) remain strong. The broadly diversified portfolio, alignment with the best lodging brands, and dominant position in the lodging industry deem the stock attractive.
Overall APLE ranks 8th on our list of the most undervalued REIT stocks to buy. While we acknowledge the potential of APLE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than APLE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.