Wall Street’s hectic pace eases up this week as we head towards summer. So far, investors have eschewed the “sell in May and go away” advice, with the S&P 500 (SP500) up 6% month to date.
There will still be plenty of earnings reports to digest, including Home Depot (HD), which should afford more insight into the impact of tariffs.
Other major earnings include Palo Alto Networks (PANW), Medtronic (MDT), Snowflake (SNOW), Intuit (INTU) and Workday (WDAY).
On the economic front, April new and existing home sales will likely have the most market-moving impact.
Earnings
Earnings spotlight: Tuesday, May 20: Home Depot, Palo Alto Networks, Keysight Technologies (KEYS). See the full earnings calendar.
Earnings spotlight: Wednesday, May 21: Lowe’s (LOW), Medtronic, Snowflake. See the full earnings calendar.
Earnings spotlight: Thursday, May 22: Intuit, Workday, Autodesk (ADSK), See the full earnings calendar.
Earnings spotlight: Friday, May 23: Booz Allen Hamilton (BAH), Inventiva (IVA) See the full earnings calendar.
Investing Group Spotlight – REITs
Not all REITs are created equal. New income investors often make the mistake of focusing on yields first and treating fundamentals as an afterthought. Investors need to evaluate the fundamentals for each REIT. That isn’t just a quick pass of glancing at a few metrics. It means drilling into the types of assets the REIT owns and modeling based on those assets. Often that results in picking REITs that don’t carry the highest dividend yields.
When investors are focused on investing in REITs, BDCs, and preferred shares, the portfolio naturally provides a respectable dividend yield. This balanced approach beats portfolios where the dividend yield is high but the income and portfolio value trend down. Here are a few examples:
We warned investors away from Medical Properties Trust (MPW) several years ago, when everyone was excited by the 7% dividend yield. MPW didn’t have a good plan to deal with its biggest tenants, and since then, its shares and its dividend have dropped significantly. We have also been warning investors about Digital Realty (DLR) lately. The problems with the company are not so severe, but the valuation is painfully high.
Elsewhere, we purchased shares of Rexford Industrial (REXR) during the disruption caused by the tariffs. Those shares are up nicely since the purchase, but should still have a long way to climb. Because they are an industrial REIT focused on Southern California, they are much more sensitive to trade with China influencing demand. Almost any resolution to the situation would be very favorable. They trade at about 18x forward AFFO despite an outstanding history of growth in AFFO per share.
