Joshua Varghese, portfolio manager at Signature Global Asset Management at CI Investments
Focus: Real estate stocks

MARKET OUTLOOK

2019 has been a strong year for REITs, with most major listed global property markets up well over 20 per cent year-to-date. This includes Canada, the U.S., Europe, Australia, Singapore and Japan. The notable exception has been Hong Kong, which is facing pressure due to continued social unrest. There seems to have been a rotation back into defensive sectors such as REITs as we get further into a global equity and bond bull market. REITs’ diversification characteristics are being exhibited, as in each of the three periods of major global market selloffs this year REIT performance was flat, helping investors to protect their portfolios.

With global bond yields at such low levels, the valuation and return profile of many REITs continues to look very attractive. As we get further into the economic cycle and closer to a global slowdown, we believe that many REITs will continue to attract capital, with geographic and sector allocation as well as stock-picking within global REITs becoming crucial. Not all REITs will fare well however and we would generally avoid material exposure to any properties facing structural challenges or cyclical exposure such as enclosed malls, hotels and offices in select markets. Going into 2020, we are sticking with what has worked, preferring companies with defensive balance sheets, moats around their businesses, and the ability to grow due to access to capital and supportive fundamentals.

TOP PICKS

MGM GROWTH PROPERTIES (MGP:UN)

FIRST INDUSTRIAL REALTY (FR:UN)

AMERICOLD (COLD:UN)

PAST PICKS: DEC. 5, 2018

ALEXANDRIA REIT (ARE:UN)

• Then: $123.54
• Now: $159.61
• Return: 29%
• Total return: 33%

INVITATION HOMES (INVH:UN)

• Then: $21.24
• Now: $30.17
• Return: 42%
• Total return: 45%

TRICON CAPITAL (TCN:CT)

• Then: $10.07
• Now: $11.23
• Return: 12%
• Total return: 15%

Total return average: 31%