The 3 Most-Watched REITs

Investors today have a plethora of resources at their fingertips when it comes to evaluating a company. Besides annual and quarterly reports, press releases, and conference calls, there is an ocean full of media noise, with pundits and analysts all vying for the ears and minds of investors.

After a while, it can become difficult to wade through the waters in order to figure out what one should actually be following, or what one should be listening to. Oftentimes I end up trying to ignore the blitz of media coverage and instead will rely on friends or colleagues to share ideas and analysis, and that frequently ends up being my best source of information.

That's why I thought it would be helpful to share with you the stocks that the majority of your peers are currently paying most attention to. Regardless of what their motivation may be, it can be helpful to get a firm grasp on market sentiment by knowing which stocks people have their eyes on. With the Fool's free My Watchlist Service now 4 months old, we have tens of thousands of people telling us what businesses have, for whatever reason, piqued their interest.

The most-watched REIT is ...
Using the aggregate data, we see that Annaly Capital Management (NYSE: NLY  ) is the clear leader in terms of the percentage of people who are actively watching real estate investment trusts. This shouldn't come as a complete surprise to Fool readers; not only is this stock a Motley Fool favorite, but it pays a whopping 14.3% dividend that easily can attract much investor attention. Annaly makes its money in a rather simple fashion: It borrows money cheaply, lends it out at a higher rate, and pockets the change. As my fellow fool Ilan Moscovitz explained in November:

The company issues shares to raise capital, which it levers up with short-term financing. It uses this capital to buy longer-term mortgage-backed securities (MBS's), collects the interest on these securities or sells them, and then repays its lenders.

This model is similar to that of the proprietary trading desks at big banks such as Bank of America (NYSE: BAC  ) and Citigroup (NYSE: C  ) , which, depending on implementation of the Volcker rule, may not even be legal in the foreseeable future. However, the difference now is that Annaly's trading is much safer (their investments are issued and guaranteed by the U.S. government) and typically as a shareholder you get to reap more of the reward. Fortunately, if you're looking for more of this type of exposure, Annaly's not the only game in town -- both American Capital Agency (Nasdaq: AGNC  ) and Hatteras Financial (NYSE: HTS  ) play in the same sandbox. However, Annaly has been around much longer than the two companies listed above and has a pretty solid track record of success.

The runners-up are ...
The next most-watched REIT is Annaly-managed Chimera Investments (NYSE: CIM  ) , which is a little bit of a riskier stock in terms of its investment portfolio. Chimera invests mostly in residential mortgage-backed securities and asset-backed securities, some of which are agency and some of which are not. It also invests in whole mortgage loans which can be comprised of jumbo loans or Alt-A mortgage loans. Currently, Chimera pays a sweet 16% dividend. However, the company was incorporated in 2007, so it only has a short track record on which to judge its success.

The third most-watched REIT is General Growth Properties (NYSE: GGP  ) , which has the typical characteristics that most people think of when REITs come to their mind.  The company operates and develops retail, industrial, and office complexes, in addition to shopping centers and mixed-use areas. Unlike the two companies listed above, General Growth doesn't benefit from low short-term interest rates in the same way as the names above, and it doesn't utilize cheap cash to lever up and loan out its capital. So not surprisingly, you won't find any whopping dividend here -- just a modest 2.5%. In fact, one of the main reasons investors are so tapped into General Growth is the fact that the company survived bankruptcy a few years back and has some great growth potential in front of it now.

The Foolish bottom line
Whether you're watching the industry's most popular companies or trying to figure out which companies could be the next industry darlings, it pays to keep your ears and eyes open. You can create your own personalized version of the Fool's My Watchlist, which will help you get the latest news, analysis, and commentary. It will also help tap you into our community of 170,000 investors who all share and develop ideas with one another. Click below to add one of these stocks to your Watchlist!

Jordan DiPietro owns no shares of any company mentioned. The Fool owns shares of Annaly Capital Management and Bank of America. Through a separate Rising Star portfolio, the Fool is also short Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 12, 2011, at 11:52 AM, feenix1944 wrote:

    I have a significant position in NLY, as well as AGNC and CIM, but one of my favorite REITs is IRC. . . before the big crash it traded in the $13-$14 range and has slowly clawed it's way back. It's not only a bargain at $9.36 today, but it pays a healthy 6% dividend... EVERY MONTH!

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