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1 Back-to-School Stock That Could Be a Big Winner

By Matthew Frankel, CFP® – Aug 29, 2021 at 6:27AM

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Here's one stock to watch in the second half of 2021.

In its second-quarter earnings report, American Campus Communities (ACC) required much stronger pre-leasing activity than last year but still significantly lower than pre-pandemic levels. In this Motley Fool Live video clip, recorded on Aug. 17, Millionacres REIT analyst Matt Frankel, CFP, explains to editor Deidre Woollard why pre-leasing activity as of July might not tell the full story.

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Deidre Woollard: Let's talk about back-to-school in general by talking about American Campus Communities. This is one I think we all got a little worried about last year, because student housing, it's the largest owner and manager and developer of student housing, so big worry. Last year, a lot of colleges went at least partly virtual, but the American Campus is back. Their same store net operating income was up 11.6% during the quarter. Their modified funds from operations improved from $50.9 million in a year ago to $58.8 million. Really coming back. Another thing that was in their earnings that I thought was really encouraging was the ancillary income. All of the stuff that they make income on from the students just being in their properties, parking fees, utilities, retail, all of that stuff is coming back pretty strongly. That's another really positive indications for American Campus.

Matthew Frankel: Yeah. I saw that the pre-leasing activity is better than it was last year, which that's not a great comparison.

Woollard: Right. Of course.

Frankel: It would be really bad if. I would've sold my shares if it had been worse. But it's not where it was before the pandemic. But I think people are really discounting the number of students that are waiting till right before the semester. Remember these are numbers as of the end of June.

Woollard: Right.

Frankel: It was 91.7% pre-leased at the end of June. Colleges start now so that means it was 91.7% pre-leased a month-and-a-half before most colleges go back. A lot of students were probably waiting to see what's going to happen. Are we going to have in-person classes? Sure, they're saying that all summer, but now the cases that are ticking up again, are they really going to bring back classes? Are we going to be hybrid? Because if so, I'm not going to get an apartment. I think you're going to see more late-season leasing activity than in previous years. Not a ton, but I could definitely see an uptake over pre pandemic years. Where you knew you were going to go back-to-school in the fall and you knew your classes were going to be in person.

Matthew Frankel, CFP owns shares of American Campus Communities. The Motley Fool recommends American Campus Communities. The Motley Fool has a disclosure policy.

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