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REITs can still Perform Well if the Fed Tapers

David Becker
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Moving into the Fed’s meeting next week there are still a number of beaten down stocks in the real-estate sectors that could generate significant returns for investors. Digital Realty Trust Inc. is a real estate investment trust that engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate.

The stock price was crushed in early November after reporting disappointing quarterly earnings. Not only did the company’s third-quarter funds from operations fall year over year, but it also revised its full-year outlook downward.

The 52-week range of DLR is $43.04 – $74.00, and the stock price hit a 52-week low earlier last week. The quarter over quarter earnings per share increased 3%, while the three year growth rate of earnings is 40%. Revenue increased 11% last quarter and the three year growth rate of earnings is 21%. The company boasts a very attractive 6.8% dividend yield and a profit margin of 17.1%.

Recent insider buying for the stock makes the stock look attractive. Chief Acquisitions Officer Scott Peterson added 4,000 shares to his holdings on December 3, 2013. He bought these shares at an average price of $44.00 per share. The transaction cost a total of $176,000. Director William Laperch purchased a smaller 2,000 shares. He bought these shares at an average price of $45.80 per share. This transaction cost $91,600.

The technical outlook shows a stock that is trying to form a bottom. The rapid decline seen in early November and then late November came on soft volume which can be viewed when observing the accumulation / distribution line. This index combines price action with volume. When movement comes with higher volume the index climbs, when movement comes with low volume the index declines. Momentum is increasing as the MACD (moving average convergence divergence) index is printing in positive territory with an upward sloping trajectory.

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