How REITs Can Help Offset Your Risk Profile


While equities have been in bearish territory, now may be the time for investors to reevaluate their risk profile and consider some income-generating REITs. In this clip from “Ask Us Anything” on Motley Fool Live, recorded on June 21Motley Fool contributor Rick Munarriz discusses how REITs can be an optimal way for investors to diversify their portfolios.

Rick Munarriz: I am a growth investor. I’ve always been a growth investor. But at the end of 2020, I said, well, you know what? Some of my stocks have done very well as we are still trying to get out of this situation. Allow me to diversify. I took some profits, and also just some fresh money that I had added to my stocks. A lot of that money, not most, but a good chunk of it, was invested in REITs. But I didn’t necessarily just say I’m just gonna buy Real estate income (O 0.28%) because they have a monthly dividend check or I’m not going to buy trendy real estate. I wanted to address specific themes within the REIT industry. As Dan mentioned, these are medical buildings, doctors. I said, well, that seems pretty stable as a lot. I know of at least half a dozen medical REITs. We basically have medical centers or hospitals that have had stable business thanks to this. I spoke earlier about the film industry. There is a company called REP properties (REP -0.51%)stock symbol EPR, and they basically focus on experiential properties.

Cinemas are their greatest because CMA (AMC 1.24%), for better or for worse, is their biggest customer. But they also have some Top-golfs for golf driving ranges, even some water parks. That’s what they have, that’s what they rent. Even further down this morning, one of the encouraging improvements that occurred was in American Tower (AMT -0.84%) and Crown (ICC -0.14%), CCI is the other, AMT and CCI. They basically have antenna towers for smartphones and for data, which will continue to grow over time. There are data centers, so you have Digital Real Estate Trust (DLR -1.64%) and equinix (EQIX -1.55%). There are a few others that focus on, basically, you need a server in the cloud computing revolution and that’s what they have. They are low-yielding REITs, but they are stable businesses that march to different beats from different drums. There is even a company that focuses primarily on the cannabis industry. If you’re feeling, “Hey, I think it’s going to thrive, it’s innovative,” IIPR their ticker symbol. This is Innovative industrial properties (IIPR -1.32%)I think.

Dan Caplinger: You have it, yeah.

Munarriz: Basically they have grow houses in markets where it’s legal we’re not talking about anything shady or illegal but they rent it out to cannabis companies to help their product and they just have the space , so that’s what they’re focusing on. These themes won’t necessarily profit as well as the businesses that use them as customers if that business is doing well. But if you think some of these companies will be bigger in the future, that certainly provides more stability for some of these REITs. They own an apartment building. It’s a REIT. Or, they own malls like Simon (GPS -0.19%) properties and it’s a REIT. You could definitely find out exactly what you think will happen in the future. Over the next few years, you try to figure out game theory to see where things will go and find income-generating real estate investment trusts that focus on exactly what you think you’re going to do. It is certainly a very interesting market. I’m certainly thinking a bit about REITs. Again, this market performed very well last year. It’s not that it’s going to be this monster comeback because if the sector goes back to growth stocks in the second half of 2022 and 2023, which is possible, and I hope that will happen even if I own REITs. I think it might not be refunded, but it’s definitely a way to offset and diversify your risk profile.

Dan Caplinger has no position in the stocks mentioned. Rick Munarriz holds positions at American Tower, Crown Castle International, Digital Realty Trust, EPR Properties, Equinix, Innovative Industrial Properties and Realty Income. The Motley Fool holds positions and recommends American Tower, Crown Castle International, Digital Realty Trust, Equinix and Innovative Industrial Properties. The Motley Fool recommends EPR Properties. The Motley Fool has a disclosure policy.


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