Outperform the Billionaires and Indexes with Stocks Like These

I’ve made my deep and abiding love of bank stocks pretty well known.

As I mentioned before, people think I’m crazy for owning so many boring little banks when there are so many (much more exciting) companies to own.

I quit arguing with these folks a long time ago. I just laugh to myself, cash my fat dividend checks, and wait for the next takeover announcement that doubles, or even triples my original stake.

People forget that all those exciting companies need banks.

So do the big blue-chip companies, the mom and pop shops on Main Street, and everything in between.

Banks make the world go-round and are pretty profitable to boot.

As a bonus, we still have too many banks in this country, and we are in the middle of a decades-long consolidation trend that leads to steady takeover activity amongst the small to mid-size banks I like to own.

But as great as banks are, they still need this one thing to do business…

Real Property, Real Money

Real Estate – it’s something that everybody needs to do business and even to live their lives.

Companies need office buildings, warehouse space, and factories.

They need stores, malls, and showrooms to sell their products to the consumer.

The workforce needs places to live, to shop, and to be entertained.

They need hospitals and doctors’ offices to take care of their health.

All of this activity takes place inside, and most of it is leased, and REITs allow me to be the one that collects the rent.

It shouldn’t come as much of a surprise when I tell you that a lot of those same folks who scorn me for owning boring bank stocks think I have lost my mind when I tell them I also own lots of REITs.

Real estate investment trusts are for older people and people too scared to own all these exciting, fantastic growth stocks.

If that’s true, then Grandma and Ned the accountant are most likely kicking the pants off the excitable types when it comes to the return they’re earning.

Since the tax laws were changed to provide the current REIT structure back in 1972, owning equity REITs (REITs that own properties and not just provide mortgage and financial services) have outperformed the benchmark S&P 500.

These REITs also had positive returns during most big market collapses including 1987, 1998, and the internet collapse of 2000-2003.

In the credit crisis REITs declined along with everything else in the world, but were in line with what index fund investors lost.

I ran a test over the weekend to see what would happen if we went back in time ten years and just bought REITs and went away for the decade.

Real Estate returns are a function of cash flows and asset values, so I only bought those that trade for less than 12 times their free cash flows, and were increasing free cash flows and asset values year over year.

At the time there were 22 such REITs, so I put a hypothetical $2000 into each and looked at what would have happened over the last ten years. That $44,000 grew to $159,473 over that time frame.

Stock indexes have had a great decade with stronger-than-average returns, but fell short of our set it and forget it for the decade REIT investor.

The S&P 500 (which outperforms most mutual funds and hedge funds as well as individual investors) earned 12.12% over the decade. That would have turned the $44,000 into $138,128.

Buying REITs and taking a long nap would have put an additional $21,345 in your pocket.

A Little Attention Can Go a Long Way

Now that’s what happens when you do nothing.

But what happens when we do a little managing of our REIT portfolio?

If you check these once a month and swap out those that have stopped growing, or now trade at higher valuations, you’d do better than Warren Buffett has done to become one of the world’s wealthiest people.

Over the last decade, you would have averaged 19.73% a year on your money while Warren’s historical rate of growth is just a little short of that at 18.7%.

That $44,000 now grows to $266,368 over 10 years. Spending an hour or so a month checking your REIT portfolio nets you an additional $106,985 over our set it and forget it REIT investor and a $128,240 more than the efficient market aficionados’ index fund.

These are the kinds of strategies that I spend a lot of time thinking of and rigorously testing before I add them to my list and recommend them to you.

These are the kinds of strategies that I spend a lot of time thinking of and rigorously testing before I add them to my list and recommend them to you.

I have dozens of strategies and guidelines that are field-tested and over three decades of experience in this business. Over at my elite trading research service, Heatseekers, that’s what helps me find the opportunities which – when combined with a disciplined, by-the-numbers approach to the market – gives us the best chances to see tremendous returns from the plays in our open portfolio, such as the super-regional bank that has gained over 14% since my recommendation in June, and the materials supplier that’s up over 43% since January.

It was these types of numbers-driven and battle-proven methods that helped me earn an undefeated record prior to joining Money Map. 119 trades and closed zero losers. Our historical data shows that if you’d been along for the ride, you would have seen an average annual return around 20% every year. If you want a shot to grow your serious money and rest easy at night, click here.

A Numbers-Driven and Youth-Oriented Stock

When I look at the list of REITs that meet my criteria today, there’s one that I think is fascinating and a fantastic long-term opportunity.

EPR Properties (NYSE:EPR) owns what they like to call non-commodity real estate.

Their portfolio captures the experience economy that is driven by millennials.

Specifically, they own entertainment, recreation, and education properties. Their portfolio includes theatres, entertainment retail centers, family entertainment centers, ski parks, water parks, and golf courses. They also have an educational portfolio that owns public charter, private schools, and early education centers.

EPR Properties trades at just ten times free cash flow and yields 6.1 at the current price.

That dividend is paid monthly, so it’s perfect for those who need income from their portfolio. The rest of us can just reinvest it in more shares to increase our long-term returns.

That payout has increased by more than 6% annually over the past eight years.

This REIT has been growing revenues, asset value, and free cash flows at a double-digit pace for a long time now, and right now we can buy that growth at a bargain price that should provide an opportunity for huge long-term total returns.

Insiders own over a million shares so they will remain focused on keeping the growth going for a very long time.

Asking why I own so many REITs is a silly question. The right question to ask is, “Why don’t you?”

To the Max,

Tim Melvin

Leave a Comment

View this page online: https://maxwealth.com/2019/07/outperform-the-billionaires-and-indexes-with-stocks-like-these/