We recently published a list of The 10 best real estate and property stocks to buy according to hedge funds. In this article, we take a look at how Equinix Inc. (NASDAQ:EQIX) compares to other real estate and property stocks.
US real estate market: A market that has been stuck in a dead end for too long
Rising mortgage rates and skyrocketing home prices have long pushed American homebuyers out of the market. The situation appears demoralizing, as economists at Bank of America expected the market to remain stagnant until 2026 or even longer. Home prices are expected to rise 4.5% in 2024 and another 5% in 2025. A critical issue weighing on first-time buyers is the rate lock-in effect, the effect that causes existing homeowners to be reluctant to sell their homes because they will have to pay a higher mortgage on a new home. Although this effect has limited the supply of homes on the market, it could continue for another 6 to 8 years. Under such conditions, the gap between rich and poor has widened, as current homeowners have more financial flexibility while a large portion simply cannot afford a home.
Long-awaited Fed rate cuts: What can we expect?
With mortgage rates currently falling to their lowest levels since May 2023, demand for mortgages from both homebuyers and homeowners has skyrocketed as applications to refinance a home loan increased. The real estate industry is looking with great interest at the rate cut announced by the Fed for September. Some experts believe that this may ease homebuyers’ affordability concerns in the short term. However, the cut is expected to be small rather than repeating the historically low interest rates seen during the pandemic. On the contrary, Nick Villa, an economist at Moody’s, believes that the rate cut is unlikely to solve the housing crisis, although a lower mortgage rate could provide some relief. Even after the rate cut, homebuyers will have to be patient with the limited housing supply, which remains the central and unresolved problem in the market.
It is important to also consider the impact of Fed interest rates on homebuilders. Stephen Kim, head of housing research at Evercore ISI, explained in an interview with CNBC how the current falling rates have prepared homebuilders for a nice fall that will bring a rebound in demand. He pointed to the same problem of tight supply, as there is a 3.8 month supply of used homes available on the market in the U.S., while it was usually 5 to 6 months. Under these circumstances, he expects a very tight market with little pressure on home prices. While the actual Fed rate cut may not have a major impact on mortgage rates, it will drive potential homebuyers out of their apartments to look for a home. In summary, the future of the U.S. housing market appears promising for homebuilders, while homebuyers may be temporarily satisfied as the rate cut will not have as much of an impact on mortgage rates and on a market severely plagued by the unavailability of homes.
Our methodology:
To create a list of the 10 best real estate and land stocks to buy according to hedge funds, we first use a stock screener to create an expanded list of relevant companies with the highest market capitalization. We then selected the top 10 stocks from our list that had the highest number of hedge fund holders. The 10 best real estate and land stocks to buy according to hedge funds were sorted in ascending order of the number of hedge funds holding shares in them (as of Q1 2024).
Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A team of IT professionals working on a digital platform, indicating the company’s agile digital services.
Equinix Inc. (NASDAQ:EQIX)
Number of hedge fund holders: 66
Equinix Inc. (NASDAQ:EQIX) is one of the world’s largest digital infrastructure companies specializing in internet connectivity and data centers. The REIT was founded in 1998 as a vendor-neutral, multitenant data center provider. It currently serves 71 markets in 33 countries and 6 continents, enabling companies to scale across the world’s largest network of interconnected data centers.
Equinix Inc. (NASDAQ:EQIX) has invested over $40 billion to build an unmatched global data center footprint. As the company reports, its global ecosystem exceeds the combined total of its next 10 competitors, as it offers customers access to over 2,000 network services, more than 3,000 cloud and IT services, over 450 content and digital media services, and more than 4,800 businesses. The REIT secured a solid $8.1 billion in global revenue in 2023.
The company’s recent financial performance is definitely promising. The second quarter of 2024 saw record gross bookings and Adjusted EBITDA crossed the $1 billion quarterly threshold for the first time. At the same time, net profit increased 45% year-on-year. The scale and reach of its industry-leading data center services portfolio doesn’t end there. Equinix Inc. (NASDAQ:EQIX) has 54 major projects in the works across 24 countries. Taking advantage of the growing digital opportunities in the fast-growing Southeast Asia region, the company has announced its entry into the Philippines while simultaneously expanding into Malaysia and Indonesia.
As digital infrastructure becomes increasingly important for delivering services around the world, Equinix Inc. (NASDAQ:EQIX) is well positioned to capitalize on the opportunities that arise. As of March 31, the company was owned by 66 hedge funds, making it one of the 10 best real estate and property stocks to buy, according to hedge funds.
Total EQIX 1st place on our list of the best real estate and property stocks to buy. While we recognize the potential of EQIX as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you are looking for an AI stock that is more promising than EQIX but trades at less than 5 times its earnings, read our report on the cheapest AI stock.
READ MORE: Analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these 10 stocks in June.
Disclosure: None. This article was originally published on Insider Monkey.
