We are updating our Position Monitor (Figure 1 below) and using the last two weeks of price declines on low volume to add AvalonBay Communities (AVB) and Equity Residential (EQR) as Best Idea Longs. It's a simple idea: We had been looking for an opportunity for some time to add these two high-quality Apartment names that are benefitting from acceleration/recovery in in Coastal Gateway markets. Rental rate growth figures continue to accelerate broadly, and we expect (1) additional upward estimate revisions and (2) FY22 outlook's to surprise to the upside for both names. We believe the call dovetails very nicely with (1) our view to overweight residential REITs in a Quad2/Quad3 environment and (2) the firm's Macro call to long REITs with AVB and EQR placing high as components of the XLRE. They join fellow Best Idea Long AMH as "set-it-and-forget-it" names through 1Q22 ahead of a potential Quad 4 in 2Q22 where things get interesting... Buy the dip!
We are also updating the Position Monitor to show Long/Short Best Ideas and Bench names only, with a broader list of "DMZ" or Neutral names rounding out the coverage universe and to follow later. Additionally, we have built and added the Hedgeye REITs Sentiment Score, which represents a stock's scoring within its own subsector on a number of variables meant to measure Low/High relative sentiment to help screen for potential Long/Short ideas. More to come on developing this tool and adding in factor exposures as well.
Figure 1: Hedgeye REITs Position Monitor
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
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