Invest In REITs With This ETF

By Casey Murphy | June 27, 2014 AAA

There are many occasions where investors find themselves wondering how to invest in real estate companies that are dominant in their respective property sectors. A diversified portfolio of real estate investments is generally sought after by many investors because of the income-generating potential and resulting dividend income. For those who don’t know, most publicly traded real-estate companies are structured as a real estate investment trust, which means they receive special tax considerations because they distribute most of their income to investors. Analyzing the entire real estate market and all its subsectors can become quite overwhelming. The sheer number of REITs available to investors doesn't make the task of knowing all your investment options any easier. Luckily, the iShares Cohen & Steers REIT ETF (ICF) acts as a nice shortcut.

For those who don’t know, the ICF ETF consists of 31 holdings and has total net assets of nearly $3 billion. As you can see from the chart below, the ETF is trading within a strong uptrend. The golden crossover in March (shown by the blue arrow) is a long-term buy signal and suggests that this is the beginning of a long-term uptrend. From a technical perspective, it is interesting to note how the price has found support of its 50-day moving average several times since the crossover and many traders would use this area when deciding where to set the exit price of their stop-loss-order. (For more, see: How To Analyze Real Estate Investment Trusts)

Top 10 Components Of iShares Cohen & Steers REIT ETF

The respectable 0.35% fee gives traders access to one of the most popular REIT ETFs on the market. Taking a closer look at the structure of this ETF and with its components could be an interesting method for retail investors to gather ideas for good individual REITs. Below is a list ICF's 10-largest holdings:

Ticker

Name

Weight (%)

SPG

SIMON PROPERTY GROUP REIT INC

7.58%

PSA

PUBLIC STORAGE REIT

7.03%

PLD

PROLOGIS REIT INC

5.91%

EQR

EQUITY RESIDENTIAL REIT

5.90%

HCN

HEALTH CARE REIT INC

5.46%

HCP

HCP REIT INC

5.28%

VTR

VENTAS REIT INC

5.27%

VNO

VORNADO REALTY TRUST REIT

5.26%

BXP

BOSTON PROPERTIES REIT INC

5.13%

AVB

AVALONBAY COMMUNITIES REIT INC

4.88%

Source: iShares.com (as of June 19, 2014)

 

Simon Property Group

When it comes to investing in real estate, analysis generally starts with the Simon Property Group. SPG invests in real estate across the globe and owns everything from regional shopping malls, premium outlets to community and lifestyle centers. The company has a market capitalization of just over $52 billion and pays an dividend of 3.10%. As you can see from the chart below, the price has moved up just over 10% so far in 2014 and based on the recent bounce off of the 50-day moving average it looks like this strong performance is set to continue. (For more, check out The REIT Way)

A Look At Public Storage Inc.

Another company that is heavily represented in the ICF ETF is of Public Storage Inc. (PSA) and for good reason. The increasing popularity of self-storage facilities and this company’s dominance in the space makes this an ideal selection. PSA currently pays a 3.30% dividend and sports a market capitalization of nearly $30 billion. Based on the chart, you’ll see that the price has been trading within a period of consolidation since the strong move higher earlier in the year. The bullish divergence between the long-term moving averages suggests that the uptrend is set to resume and current levels could provide an ideal entry point for risk tolerant investors. It would not be surprising to see traders protect their positions by placing a stop-loss order below the 200-day moving average, which is currently at $161.10. (For related reading, see: 5 Types of REITS and How To Invest in Them and 3 Types Of REITs For Your Portfolio)

 The Bottom Line

Real estate investing can be a daunting task given the various subsectors and corporate structures that are usually involved. As mentioned above, one popular solution for strategic investors could be the iShares Cohen & Steers REIT ETF. This fund offers wide exposure to the REIT sector, an intriguing dividend and is trading within an interesting chart formation. However, for traders who want to only want to add one of two positions in this area then it could prove to be strategic to check out the top holdings of the ETF for more ideas. (For further reading, check out Add Some Real Estate To Your Portfolio)

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