Assessing AVRE for value in the real estate industry
Jhe real estate sector has historically been vulnerable to growing interest, which largely explains the group’s soft start to 2022.
However, some large-scale real estate benchmarks are slightly outperforming the S&P 500, and with investors still in need of income due to low government yields, there’s something to be said for looking for value among exchange-traded funds. related. This group includes the Avantis Real Estate ETF (AVRE).
AVRE, which debuted last September, is trying to beat the S&P Global REIT Index. Many newbies don’t realize this, but the real estate industry is booming, and the different industries in the sector don’t always work together. This phenomenon showed up during the worst days of the coronavirus pandemic when hotel real estate investment trusts (REITs) slipped. Today, however, some analysts are bullish on healthcare and hospitality REITs.
“While the vaccine allows travelers to return to hotels and keeps residents of nursing homes safe, the travel restrictions and quarantines that may arise from the variants could cause a significant drop in occupancy for the two under -sectors,” says Morningstar analyst Kevin Brown. “Despite short-term disruptions, we continue to believe that the hospitality and healthcare sub-sectors will have years of strong growth ahead of them.”
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Healthcare and hospitality REITs make up about 8% of AVRE’s list. While the pandemic initially dampened travel-related REITs, other groups in the sector have flourished and still offer considerable upside potential for long-term investors. These include industrial and self-storage REITs.
“While both fell in the early months of the pandemic, they returned to pre-pandemic levels in the summer of 2020. Then, as real estate fundamentals improved through 2021 , they’ve produced significant returns for investors,” Brown adds.
Industrial REITs are AVRE’s second largest industrial allocation, just north of 20%. This positions the fund to capitalize on the expanding real estate needs of e-commerce businesses.
Among AVRE’s individual constituents, Brown is bullish on senior care REIT Ventas (NYSE: VTR), which also owns other medical real estate.
“While the company’s medical practices and life sciences portfolios are not expected to be impacted by the coronavirus outbreak, the senior housing portfolio has seen a very significant impact on occupancies as the virus has the highest case fatality rate among the elderly.However, as the virus continues to hurt net operating income in 2021, the industry is expected to experience strong long-term growth from the next baby demographic wave. boomers aging in retirement homes,” concludes the Morningstar analyst.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
