Dream Stocks for Real Estate Investors

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and see what the 10 best stocks of the past decade were. But for my part, I'm more interested in the tools that can not only help me find new stock ideas, but also have the resources necessary to evaluate tomorrow's greatest companies.

There is a tool that offers a variety of resources to help with finding tomorrow's leaders: Motley Fool CAPS, a 120,000-member community of investors helping each other beat the market.

We've enlisted CAPS to screen the real estate sector and get the story behind some of the more highly rated stocks. CAPS' nifty screener will help us find stocks with:

• A market cap of at least $100 million.
• A three-year revenue growth rate of at least 20%.
• A price-to-earnings ratio of less than 25.

Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.

Opinions with the numbers
Here's a sampling from the list of stocks our screen pulled up today.

Data and star rankings from CAPS. All data as of November 14.

E-House
China's stock market has been battered this year, offering discounts on shares of big companies like China Mobile (NYSE:CHL) -- down 50% year-to-date -- and Aluminum Corp. of China (NYSE:ACH), which is down 80%. But the country has plenty of room for growth, and many still believe that China still holds tremendous opportunities for investment, including the country's largest real estate agency, E-House.

While shares of E-House have been trending down, revenue and earnings have been going up. Through the first half of 2008, both top and bottom lines were 90% higher than last year, leaving the company valued way below the estimated 29% five-year EPS growth rate. And despite adverse market conditions, E-House set a sales volume record during its October holiday period, selling roughly 800,000 square meters of property compared to just 200,000 last year. With growth like this, it's no wonder 96% of the 602 CAPS members rating E-House expect it to outperform the market.

NorthStar Realty Finance
NorthStar Realty Finance, which invests in commercial real estate debt, beat analysts' expectations in its third quarter earnings release. Excluding one-time items, NorthStar delivered funds from operations (FFO) of $26.6 million, ahead of analysts' expectations and the $19.6 million reported a year ago.

Unlike companies like Wachovia (NYSE:WB) or Citigroup (NYSE:C) that have no foreseeable end to non-performing loan related write-offs, as of the end of the third quarter, NorthStar had no non-performing loans and no delinquencies on principal or interest payments due. While Chairman and CEO David T. Hamamoto recognizes the challenging environment ahead, the company's $280 million in available liquidity gives it a strong position in a market bordering on disaster. 

The a high level of insider ownership and a dividend yield that is approaching insane at almost 40% has more than a few CAPS investors excited about NorthStar's prospects to beat the market -- more than 93% of the 388 members rating NorthStar Realty Finance are bullish today.

Ventas
Health care and senior housing REIT Ventas more than doubled its net income in the third quarter, reaching $64.7 million compared to $28.0 million a year ago. Management is pleased with its portfolio's deliverance of reliable cash flows, as funds from operations increased nearly 10% to $97.2 million.

Since mid-2007, the company has been taking actions to prepare for the major credit downturn, including earmarking funds to pay for upcoming debt maturities. Some of the company's highly defensive moves are affecting near-term earnings, but it still has potential dispositions of between $100 million and $150 million in assets that could book gains in the fourth quarter and early next year. The prudent moves by management are a big reason why nearly 95% of the 157 CAPS members rating Ventas see it outperforming the market going forward.

Let 120,000 investors be the judge
The collective wisdom of a huge pool of investors can help give context to a page of numbers developed through a stock screen. But even with an entire community of qualified opinions acting as the judge, individual investors are still the jury and should perform their own due diligence.

Run your favorite factors through the Motley Fool CAPS screener. It's totally free, and we think you'll like the results.