The Intelligent REIT Investor Guide

CHAPTER 11Searching for Blue Chips

“The qualitative factors upon which most stress is laid are the nature of the business and the character of the management. These elements are exceedingly important, but they are also exceedingly difficult to deal with intelligently.”

—Benjamin Graham

Many types of investment strategies can be pursued in the REIT world. You can buy and patiently hold high‐quality companies over the long term. You can take more risk and go for large gains in more speculative stocks, such as very small‐cap REITs. You can focus on those that are selling at deep discounts to NAV. Or you can pick and choose between the strategies depending on the stock.

Some people target REITs that have stumbled and hope for a turnaround. Others buy high‐dividend yields, believing they'll somehow hold. It's all a question of one's investment preferences, return requirements, and risk aversion.

All of these approaches (or at least all but yield‐chasing) can work if investors are disciplined, patient, and exercise good judgment. Ultimately, there's no consensus as to which investment style or preference works best. And a Warren Buffett–type guru of the REIT world has yet to emerge (although Buffett himself has bought them on occasion).

But the most conservative investors – those seeking quality and safety above all else – are prone to buying blue‐chip REITs. Regardless of whether that describes you personally, it's vital for all REIT investors to know what makes these investments ...