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These 3 stocks are on track for a scorching summer

Jhe stock market is down, but that doesn’t mean there aren’t big stocks on track for a scorching summer. The real estate market is on fire and summer is one of the busiest times of the year. There are plenty of reasons these three real estate stocks are set to have a torrid season.

If you’re looking for high-quality stocks to help carry your portfolio through the market downturn, you might want to consider investing in communities of the sun (NYSE: SUI), Central American apartment communities (NYSE: MAA)and red fin (NASDAQ: RDFN).

Image source: Getty Images.

communities of the sun

The COVID-19 pandemic has spurred a shopping spree for recreational vehicles (RVs) and boats as people seek new ways to get out, have fun, and travel from the comfort and safety of home. 2021 marked the highest number of RV shipments in history, jumping nearly 40% year over year, while net boat sales in 2020 topped 320,000 units, a 13% jump from 2019 levels.

Higher numbers of boaters and RVers means increased demand for RV and marina spaces offered by Sun Communities, a real estate investment trust (REIT). It owns and operates more than 600 mobile home communities, RV resorts and marinas in the United States, Canada and the United Kingdom.

Sun Communities has done an excellent job of expanding its portfolio to add shareholder value over the past few years. Its acquisition of Safe Harbor Marinas in 2020 has helped boost revenue by diversifying into the nautical scene, and its latest acquisition of Park Holidays UK in 2021 has expanded its overseas portfolio. These efforts, combined with increased demand during the pandemic, have resulted in an absolutely incredible performance lately.

Net operating income (NOI), a metric that shows a REIT’s profitability after expenses but before interest, taxes, depreciation and amortization, rose 31% year-over-year last summer in third quarter 2021. Occupancy is 100% for its RV sites from the first quarter of 2022, and the NOI of its marinas increased by 1.2% at the start of 2022.

Despite this, stock prices are down 26%, mainly due to market turmoil. While the stock price drop is definitely life-changing for existing investors (myself included), it means new investors may step in as the stock trades at a noticeable discount, around 21 times its funds. operating (FFO) projected for 2022. I personally doubled my investment in this business while prices were favorable.

Central American apartment communities

Recent migration trends see people moving from major northern cities to sunnier southern states. This region, nicknamed the Sun Belt, is booming.

According to recent census data, Phoenix, Houston, Dallas, Austin and Atlanta, major cities in the Sun Belt, gained 300,000 new residents combined from mid-2020 to mid-2021. During the same period, New York, LA, Chicago and San Francisco, some of the most popular cities in the United States, have lost more than 700,000 people, collectively.

Mid-America Apartment Communities (MAA), a multi-family REIT specializing in the ownership and rental of Class A apartments in the Sun Belt of the United States, is one REIT that is benefiting from this new demand and migration trend. MAA has seen its performance soar since 2020, with mixed rental rates for new and renewal leases growing in double digits. Most recently, in the first quarter of 2022, its blended rental rates rose 16.8%, while the NOI and FFO jumped 16.9% and 20%, respectively.

Mid-America isn’t relying solely on demand to drive revenue growth. It also has a strong renovation program where it revamps older, outdated apartments to help units compete in the market and generate higher market rents. Recently completed units posted rents 11% higher than non-renovated units. It also has five development projects underway, which are expected to be fully delivered by 2024.

Summer is one of the busiest seasons for rental housing, largely because children are out of school and weather conditions are more favorable for moving. This means that the rental momentum it has already achieved could go up a notch in the coming months.

Mid-America is projecting a 13.5% increase in NOI for the full year of 2022. Given the state of the housing market, I really think that can be achieved. Like Sun Communities, market volatility put MAA on sale, and it is now down 24%. This makes this moment an advantageous time to get started.

red fin

Down 71% year-to-date, Redfin is one of many tech stocks that have been absolutely hammered this year. One of the largest online marketplaces for buying, selling and renting real estate with over 51 million monthly users on average, Redfin has actually had a pretty solid performance in recent years. A surge in home purchases and rising real estate values ​​since the start of the pandemic has given the company a serious boost and helped it grow revenue by 123% year-over-year and its gross profit by 71% in the first quarter of 2022.

There is talk of a market cooling, with several signs that demand and competition are starting to slow, but there seems to be another big buying boom before interest rates or prices get too out of control. This coincides with the peak real estate season – summer.

I expect to see strong profits for the summer months from Redfin as people try to secure a home before interest rates rise even further. More activity, higher prices and higher rates all translate to higher revenue for Redfin.

The big caveat here is whether it will last. If the real estate market slows down, this could lead to a decline in performance over the next few years. This should be considered carefully, especially since Redfin still operates with a net loss.

However, the momentum it is experiencing today and its share price at an all-time low should not be ignored today. It’s a well-funded company with plenty of cash and great qualities for long-term growth.

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Liz Brumer-Smith holds positions in Mid-America Apartment and Sun Communities. The Motley Fool fills positions and recommends Mid-America Apartment, Redfin and Sun Communities. The Motley Fool recommends the following options: $22 May 2022 Long Calls on Redfin, $26 May 2022 Short Calls on Redfin, and $28 May 2022 Short Calls on Redfin. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.