We’re heading into earnings season with the market just 2% higher than the last earnings season.
That’s not all that impressive, frankly.
More significantly, it’s a good sign that the “reopening trade” that’s been so good for returns over the past few months is close to playing itself out.
Entertainment stocks, cruise ships, airlines, hotels – they’ve all been great for months, but like they say, nothing lasts forever.
That said, it’d be premature to close the books on this oh-so-lucrative trend. Real estate is going to continue to throw off unusually high gains in a flattening market, and there’s one stock to buy to take advantage of all of it.
Investors are starting to catch on to this one, so you want to make sure you’re “in” before the next leg higher…
This Is Going to Be the Summer’s Best Sector
Real estate investment trusts (REITs) are a “target rich” environment, which isn’t all that surprising when you consider the fact that we’re in the hottest real estate market since 2006.
To date, the iShares U.S. Real Estate ETF (NYSEArca: IYR), which is a handy barometer of the U.S. real estate market, is trading 22% higher than where it started the year. That performance almost doubles the S&P 500 and more than doubles the ever-loved Nasdaq 100.
Volume on the IYR components has increased over the last month, bucking the “sell in May” trend. At the same time, that volume is driving prices higher, unlike the rest of the market that is seeing declining volume and choppy prices.
My volatility band systems have been pinging REITs left and right.
The seasonality report for July shows that the IYR turns in a whopping 2.3% return during the month of July 85% of the time. Both numbers are worth following as the rest of the market sees drying volume.
And that’s just the sector as a whole. When you get down into individual stocks, it gets even better.
That same volatility filter put Welltower Inc. (NYSE: WELL) on the top of my screen. A deeper dive on WELL shares paints the picture of a REIT ready to rise.
The 20- and 50-day moving averages in a nice uptrend – we’ve even seen a recent “silver cross.” Most importantly, Welltower invests in healthcare infrastructure, part of the last round of reopening.
We’ve even seen an upgrade of WELL shares, as the analyst community is starting to pick up on the volume and price movement, meaning we should grab this one now to get every penny out of the seasonally strong July trading period.
Not only that, but the market’s performance over the past few days is handing us a decent entry point; some profit-taking has sent the stock about 1% lower over the past few sessions, but that’s not going to last, and the decline does nothing to take the luster off those beautiful moving averages.
The bottom line: Buy Welltower here at market, and look for it to outperform the stock market for at least the next quarter, if not longer.
— Chris Johnson
Source: Money Morning