REITs Outperform Popular Real
Estate Developer Stocks
Real Estate Analysis Limited
It¡¦s a matter of financial freedom
We have utilized the new (launched in July 2012) Total Return tool offered
https://webb-site.com to compare the total returns of several Hong
Kong-based REITs (Real Estate Investment Trusts) and two popular real estate
conglomerate stocks, Cheung Kong Holdings and Sun Hung Kai Properties.
The result upfront for the busy or impatient readers
= the REITs investigated here outperform the two popular real estate stocks
mentioned above. Note we are talking about total returns which include note
just stock price movements up or down but also dividends, bonus warrants,
and the like, and such are assumed to be reinvested as well. For methodology
and details, please refer to the relevant section in Webb-site. The period
studied starts from November 2007 to August 2012.
Busy bodies may leave now.
Out of curiosity, we have also calculated the volatility of the various
stock price movements during the period with a view to gauge the riskiness
of the underlying stocks. Return and risk go together, don¡¦t they?
Chart 1: Total Return%
The REITs as a group outperform the two selected real estate developer
stocks. They also beat another popular stock, the global HSBC bank, which is
still a favorite in town. In short, the REITs produce a positive return
while the non-REITs induce losses.
Among the REITs, one stands out exceedingly, namely the LINK REIT. Then
there are a cluster of runner-ups consisting Yue Xia, Prosperity, and
Sunlight. There are two laggards; Champion and Regal. Refer to the chart and
table below for the total return figures.
2: Return and Risk
Technically, the X-axis represents the total return percentages while the
Y-axis reflects stock price volatility which is deemed a risk measurement.
Obviously, it would be nice to have a stock which goes to the far right on
the horizontal X-axis and as low as possible on the vertical Y-axis i.e.
high return yet low risk.
However, none of the stocks herein fit exactly this bill. Nonetheless, this
does not mean there is no or little choice. Look closely and two of the
stocks stand out from the rest: Sunlight REIT and the LINK REIT.
In terms of total return, the LINK takes first place while Sunlight occupies
the second. However, the LINK has a higher stock price volatility level,
i.e. riskier, than Sunlight. And collectively these two stocks outperform
the rest during the period. Not only do the rest trace behind them in terms
of return, a few even come with higher volatilities, not to mention the two
developer stocks being in red.
While there is no guarantee that past performance will continue in future,
the past performance demonstrates that REITs could be a viable investment
option, notwithstanding the hiccups during IPOs or less than sociable
Disclosure: your humble author owns some REIT stocks.
The article and/or content contained herein are for general reference only
and are not meant to substitute proper professional advice and/or due
diligence. The author(s) and Zeppelin, including its staff, associates,
consultants, executives and the like do not accept any responsibility or
liability for losses, damages, claims and the like arising out of the use or
reference to the content contained herein.
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