Author: Michael Arold
Disclaimer: Michael Arold owns AVB in his Covestor Technical Swing model.
September 16, 2010: Avalonbay Coummunities (NYSE: AVB) is a residential REIT, focused on rental apartment communities. I believe that AVB is currently in a sweet spot of the market:
– More and more individuals are choosing to rent instead of owning due to tighter credit standards.
– Declining housing prices have created uncertainty among Americans. Even if they have the money to buy an apartment, it is psychologically difficult to invest after three years of declining property values.
– Employment has at least stabilized, people are moving to new regions to find jobs. Renting an apartment is usually preferred when starting a new job.
– Construction trends suggest tight supply situation.
– AVB is one of the strongest companies in the outperforming REIT sector.
– AVB is yielding 3.2% as of September 16, 2010. Investors are currently showing increased appetite for dividends.
– Real Estate as a sector is widely hated by analysts, which is bullish from the contrarian point of view.
– Positive earnings momentum: AVB raised guidance at their last quarterly meeting.
– Highly shorted REIT: 11% of float held short, which could fuel further gains.
– Positive chart trend: AVB just broke out to new heights from a five month consolidation.
I added a small position to the portfolio and plan to add more shares on pullbacks.
