There are hundreds of listed REITs. A Screener can be a useful tool to narrow down REITs based on a pre-set of criteria which matches what investors investors use to select a stock, essentially speeding up the stock selection process.
Less time is narrowing down the sector and more can be spent on analyzing individual companies.
A downside is the potential of missing opportunities that are filtered out. This can be managed through running sensitivities by adjusting criteria to see those that were marginally filtered out.
We like to used FINVIZ to screen the REIT sector based on the requirements.
- Stocks prices that are trading below NAV or Book Value (Potential value and mispricing made by the market)
- Total Market capitalization is larger than $1 billion dollars (ensure there is sufficient liquidity in the stock)
- Above 1 and 2 applied to the Diversified REIT sector only.
Best REIT Screener
The result is sorted by REITs that have the highest discount to NAV. The above criteria should be the starting point of analysis rather than taking it at face value.
There could be a number of reasons a REIT is trading REITs trading discount below NAV. This could range from over priced real estate on balance sheet to lack of faith in management in executing shareholder value decisions.
Usually the stock of REITs trading above book have a high dividend yield. However the market could be skeptical on the trust maintaining current dividend rates and essentially pricing in a dividend cut.
The above example is based on screening the first 2 crtieria on the diversified REIT sector. FINVIZ can breakdown the REIT market along a number of sub markets:
REIT Market Screening
Using the same criteria above on the residential REIT market presents a different a result.
Residential REIT screen shows only 4 stocks larger than $1 billion market cap are trading below book value. This could mean investors are currently favoring the residential real estate market verses diversified REITs.
This can have implication for relative value strategies to value investors picking up cheap companies in diversified or even momentum investors to trend follow residential REITs.
Other criteria can be used to screen REITs include
- Dividend yield (from high to low or only show REIT yield above certain percent)
- Different size criteria (from largest REIT only to REIT within a certain market capitalization range)
- Earning growth of the stock driven by consensus estimates
- Volume of actual stock traded daily (vs total market cap)
- % of total stock sold short (short squeeze opportunities or short REIT ideas)
- Technical criteria like best performing REIT year to date or last 12 month.