The S&P 500 is undoubtedly taking a beating. With the index down 15% year to date and 3.5% over the past 12 months, right now may not seem like a great time to invest. But not all stocks are taking a hit. In fact, there are several high-quality stocks, including these three real estate investment trusts (REITs), that are actually winning.
If you're looking for winning stocks while the market is down, here's why you should consider investing in Iron Mountain (IRM 1.80%), Welltower (WELL 0.10%), and Host Hotels & Resorts (HST -0.28%).
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Iron Mountain
In today's digital age, physical data storage may seem irrelevant. But Iron Mountain -- which specializes in the storage of physical data like papers and files for attorneys, medical offices, financial institutions, and major corporations -- is proof that records storage is alive and well.
In operation since 1951, the company has built an impressive portfolio of 1,400 storage facilities that serve over 225,000 customers globally. The company offers secure shredding, records storage, asset and data management, art and other collectibles storage, and data storage solutions. Over the past year, its storage revenue has grown considerably, to a record $1.2 million in the first quarter of 2022. But Iron Mountain's legacy business isn't all it has going for it.
The company is expanding its business model to incorporate data storage facilities to better serve the growing need for data storage in our technological times. Today, it has 20 data storage facilities in its portfolio and its business is booming. Its global data center revenue grew by 36% in Q1 2022. Data centers still only make up around 8% of Iron Mountain's business, but its footprint in the data industry is definitely growing.
Its debt ratios are in line with the REIT standard, which is 5 times its earnings before interest, taxes, depreciation, and amortization (EBITDA), and its dividend return is quite competitive, at 4.5% today. Plus, Iron Mountain has produced a nearly 30% return over the past year and managed to stay in the positive at a just over 1% return year to date. Given its presence in all aspects of data storage needs today, I think it has a lot of potential for growth.
Welltower
The senior housing sector was hard hit by the pandemic. Concern over the contraction and spread of COVID-19 in higher-risk, elderly adults put a huge strain on occupancy levels and demand for senior housing communities. Which is not great news for healthcare REIT, Welltower. Share prices fell over 36% in March 2020, only recovering to pre-pandemic levels in recent months.
But a decline in case numbers and high rates of vaccination among the elderly have helped demand slowly return for senior housing communities. Welltower's May operating update indicated 11% revenue growth in its senior housing facilities, although revenue is still well below pre-pandemic levels. Thankfully, Welltower doesn't solely rely on its senior housing communities for income; 38% of its net operating income is generated from outpatient services and short- and long-term acute care facilities.
Welltower still has a way to go before it's fully recovered from the impacts of the pandemic, but it's optimistic about its long-term prospects. By 2036, it's expected the population aged 85 and older will be double what it was in 2019, to an estimated 12.6 million people. And right now, there's a serious shortage of housing for this age demographic. The National Investment Center for Seniors Housing & Care says 54,000 units are needed to be delivered each year until 2025, from which an additional 95,000 would be needed from 2025 to 2030 to meet the demand in 2030.
Aging baby boomers and the lack of housing to serve them hold tremendous growth opportunities for Welltower in the next 10 to 20 years. The company has produced a 23% total return over the past year and is up 3% year to date, despite the volatility of the market. Long-term investors that can withstand short-term impacts from COVID-19, which will undoubtedly continue to affect the company's earnings for the next few quarters, could be handsomely rewarded with this potential long-term winner.
Host Hotels & Resorts
The hospitality industry, like many others, was severely affected by the pandemic. The lack of interest in or ability to travel caused hotel bookings to shutter to a near halt for much of 2020. An increase in vaccination rates and confidence in the ability to safely resume travel over the past year has helped the hotel industry recover. That has been great news for Host Hotels & Resorts, the owner of the several Marriott International, Hyatt Hotels, and Sheraton Hotels and Resorts hotels, along with several other boutique hotels across the United States.
Q1 2022 saw room rates surpass pre-pandemic levels for the first time, while revenue has grown 169% year over year, although still below 2019 levels. The company sold a number of its lower-performing hotels in 2020 and 2021, having roughly 10,300 fewer rooms than it had in 2017. The sale of these properties helps the company float during a challenging few years while also improving its balance sheet. Its net debt to EBITDA has increased notably since the start of the pandemic, but is still well within healthy ratios, sitting at 4.6 times with $2 billion in liquidity.
I think there is still a lot of room for share price growth as the company continues to see travel and demand for stays at its 78 hotels and resorts further recover. Dividends still sit 24% below pre-pandemic levels, but the company has already raised the dividend since reinstating it at the start of 2022. Today, its dividend return is around 1%, which isn't great. But its share price return of 14% thus far in 2022 more than makes up for it.
