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We found an interesting real estate |
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program REIT. |
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Released on Monday, November 7, 2011, 8:00 AM ET
Pittsburgh, PA (SpeculatingStocks) - Associated Estates Realty Corporation (NYSE:AEC) is an equity real estate investment trust which owns and operates 52 apartment complexes and 7 other rental entities as well.
Normally, we would be a little skeptical about investing with a real estate program given the current instability in the markets, but this corporation sets itself apart from the others.
Because they have chosen to focus on apartment complexes they have selected one of the few niches of the real estate industry actually proving to make money. As individuals come out into the job-market with little money to afford a home at the now prime-mortgage rates, they are forced to rent, shoving up the demand for rental services—increasing their prices and the profits.
AEC is a small cap organization with a market capitalization of around $701 million and is currently trading at around $16.89 per share (4:27 PM EDT, November 4th, 2011). AEC has a P/E of about 113 and an EPS of $0.15 per share. The company has a current ratio of 0.29, which is a little lower, but they are highly leveraged to own these properties, with rental income, it is likely they will be able to forward their debt and pay it off. AEC also produces a dividend of about 3.10% on a yearly basis, so any gains on this stock from appreciation will overcome inflation on the investment.
A play on this stock would be tactical, its technicals are less giving than we would like, however, the stock’s candle-trading offers some clues to its movement style. About every 2 months, the stock plummets to a support of about $14.50 per share before rebounding equally in the opposite direction—reaching as high as $18.85 per share this year. The P/E is currently around 113 times earnings, which is extremely high for a company this size, and it is no surprise that the forward P/E is measured at only 13.73 times earnings. This means either the company is expected to have outlier level earnings in the fourth quarter, or the price is expected to pop down. Fortunately for you, this cycle restarted at the beginning of October, which means the stock could pop any day in November or early December, you might want to be prepared to buy low and sell high on the rebound. AEC has a current volatility beta of 0.94; however, the Bollinger bands seem to indicate that volatility will increase in the near future, as the extreme-range lines pinch together.
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