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 VICI Properties Inc. (NYSE:VICI) 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).
A business executive in a sharp suit shaking hands on a real estate deal.
VICI Properties Inc. (NYSE:VICI)
Number of Hedge Fund Holders: 33
Forward P/E: 11.80
VICI Properties Inc. (NYSE:VICI) is one of the largest owners of gaming, hospitality, and entertainment destinations in the United States. The company owns 93 experiential assets across a diverse portfolio which comprises 54 gaming properties and 39 other experiential properties, and four championship golf courses positioned across the US and Canada. Under triple-net lease agreements, its properties are occupied by gaming, leisure, and hospitality operators.
The scale of VICI Properties Inc. (NYSE:VICI) is evident from the fact that it is one of the largest triple net lease real estate investment trusts. The company has also demonstrated a strong record of growth and tenant diversification. VICI’s assets have high barriers to entry and high financial transparency making it different from traditional net-lease REITS. The company has also diversified itself with other revenue streams by being the largest owner of hotel room real estate and privately owned meeting, convention, and event space in the US.
During the second quarter, VICI witnessed a 6.6% revenue growth, year-over-year. Net income rose 7.3% to $741.3 million while AFFO attributable to common stockholders rose 9.6%, year-over-year. Furthermore, the REIT announced up to $700 million investment through VICI’s Partner Property Growth Fund strategy to fund extensive reinvestment projects at The Venetian Resort Las Vegas. Additionally, the firm is to favor from secular trends in experiential real estate with the rising share of consumer discretionary income being spent on experiences
VICI Properties Inc. (NYSE:VICI) is a leading player in experiential real estate with quality tenants in durable sectors across attractive geographies. As of Q2, the stock is held by 33 hedge funds.
Overall VICI ranks 1st on our list of the most undervalued REIT stocks to buy. While we acknowledge the potential of VICI 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 VICI 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.