The recent market turbulence has sent the S&P 500 into bear market territory, as the benchmark index is still more than 20% below its high. But that doesn't even begin to describe what has happened to some of the market's most popular growth stocks. The tech-heavy Nasdaq-100 is down by 30%, and many of 2020's and 2021's biggest winners are down by 50%, 70%, or even more.
Fortunately, my portfolio is filled with real estate investment trusts, or REITs, in addition to my substantial growth stock holdings. And some of these have performed quite well this year, handily outperforming the major indices, with my worst REIT down by "only" 25% this year. Here are two in particular that have kept my portfolio declines more palatable in 2022.
One of the most resilient stocks on the market
Realty Income (O 0.24%) is the first REIT I ever bought, and one that I plan to hold in my portfolio for decades to come. Not only does it have a history of excellent returns, with a 15.3% annualized total return since its 1994 NYSE listing, but Realty Income is an extremely resilient company in turbulent times, as evidenced by its recent stock performance. Since the beginning of 2022, Realty Income's total return has been negative 1% -- not too shabby in this market.
The reason for the resilience is the structure of the company's portfolio. Realty Income owns more than 11,000 properties, and most are occupied by tenants in recession-resistant businesses. Just to name an example, dollar stores are a major type of property owned by Realty Income, and these businesses actually tend to do better in tough times.
Not only are the tenants resilient, but they sign long-term leases with annual rent increases built right in. This is how Realty Income has increased its dividend by 116 times in its 28-year history on the NYSE, and it is why the company is well-positioned to outperform the market in uncertain economies.
This REIT has actually made money in my portfolio this year
EPR Properties (EPR -0.10%) is an experiential REIT. It owns a portfolio of properties occupied by movie theaters, waterparks, ski resorts, eat-and-play businesses, and other businesses that sell experiences. And it might surprise you to learn that despite a general fear of a recession and a decline in discretionary spending, EPR has delivered a positive 5% total return so far in 2022.
There are a few good reasons for this. For one thing, while people may indeed pump the brakes on buying items they don't really need, they are out in full force when it comes to spending on experiences. Box office receipts are at their highest level since before the pandemic, and other experiential businesses are largely doing even better than in pre-COVID times.
Second, EPR is ready to get back into growth mode, and it has an excellent balance sheet with which to do it. At the end of the first quarter, EPR has more than $320 million in cash on hand and an untapped $1 billion credit line. The cash is a huge advantage in a rising-rate environment like this. For example, instead of having to borrow at elevated interest rates, EPR recently made a $142 million acquisition of an iconic Canadian resort and a waterpark using its cash on hand.
Most REITs aren't in the same boat
To be sure, not all REITs have done quite as well as these. In fact, the Vanguard Real Estate ETF (VNQ -0.57%), which is a good gauge of the REIT industry, is down by about 20% this year, in line with the overall market. These just happen to be two resilient REITs whose businesses are going to do just fine no matter what short-term economic headwinds come our way, and their stock performance reflects that.
