iREIT Daily

A Major Recession Indicator

Brad Thomas

467 postsAugust 8, 2022

When companies tighten their belts in paying for commercials, billboards, and online advertising, it often indicates financial concerns. In fact, those are some of the first expenditures many cut during tough economic times.

Sure enough, in this “unofficial” recession of ours, many businesses have slashed their advertising budgets to free up capital.

For a few months now, the tech sector has reported revenue losses due to a decrease in ad demand. Facebook’s parent company, Meta (META), disclosed its first earnings decline, earlier this year, as we all know by now.

What is less well known, however, is how its digital advertising sector played a part in that. From its June 30 press release:

“We expect third-quarter 2022 total revenue to be in the range of $26-$28.5 billion. This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driver by broader macroeconomic uncertainty.”

We can also consider Google’s parent company, Alphabet (GOOGL), the world’s greatest digital-advertising heavyweight. It disclosed its worst quarterly sales growth in two years as advertisers cut their spending on YouTube.

Meanwhile, outside of tech, The Wall Street Journal reports:

“Warner Bros. Discovery Inc. (WBD) home of cable channels including CNN, TNT, and the Food Network, on Thursday cut its outlook for this year and next in part because of a slowdown in advertising. In recent days, the owners of outlets including the CBS television network, The New York Times, and USA Today all said their ad revenue was under pressure during the latest quarter.
“‘Given the less-favorable macro environment, we are seeing softer demand in the scatter market,’ said Gunnar Wiedenfels, the chief financial officer of Warner Bros. Discovery, referring to the period when TV ads are sold closer to air date.”

However, even with these pessimistic outlooks, some in the business still anticipate overall ad spend to be strong through this year. GroupM, the ad-buying agency owned by WPP (WPP), announced just this summer that it predicts an 8.4% global increase to $837.5 billion…

Not counting U.S. political ad campaigns.

Either way, let’s keep an eye out for such data. As I said above, it can be very telling about greater economic trends.

More Non-REIT News to Know About

The Elon Musk and Twitter (TWTR) feud has had more twists and turns than a horror flick. To recap what’s happened so far:

Musk made his intentions known to buy Twitter.
Twitter made its intentions known not to be bought.
Musk worked them into a corner, where they accepted a $44 billion offer.
More drama ensued.
Musk backed out of the deal, saying that fake accounts and spam made up way too much of Twitter’s user base.
Twitter took to the courts to hold Musk to his word.
Musk countersued.

And now it seems the Tesla mogul may be interested once more in purchasing the social media platform.

On Saturday, he called the company’s bluff, tweeting that if Twitter could deliver details on its account-sampling, bot testing system… and show how it confirms authentic accounts… the $44 billion deal could progress again.

“However, if it turns out that their SEC filings are materially false, then it should not,” the biggest (and perhaps most eccentric) billionaire stipulated.

All of this back and forth is throwing the company’s share price through a loop, as should be expected. In which case, it doesn’t help that Twitter is refusing to comply to the seemingly sensible request.

It says it’s ridiculous Musk feels he was fooled into making the offer, writing in a filing release last week:

“According to Musk, he – the billionaire founder of multiple companies, advised by Wall Street bankers and lawyers – was hoodwinked by Twitter into signing a $44 billion merger agreement. That story is as implausible and contrary to fact as it sounds.”

And as much as it’s ridiculous that Twitter won’t comply… I have to admit here, that’s a good point.

The World According to REITs

Prologis (PLD) is a powerhouse when it comes to warehouse properties. Based in San Francisco, California, this real estate investment trust (REIT) has made headlines for both its tenacity in acquisitions and its outspoken management team.

So it’s not too surprising that the company performed well in terms of Q2 revenue and its balance sheet.

Prologis’ earnings report showed net earnings per diluted share were $0.82, up from Q2-21’s $0.81. Core funds from operations (FFO) jumped from $1.01 in 2021 to $1.11 for this quarter.

“The pandemic drove record demand for the past two years, which translated into all-time low vacancies and unprecedented rent growth,” said Hamid R. Moghadam, co-founder and CEO, Prologis. “As conditions normalize, we are still seeing healthy demand that rivals past peak cycles and, informed by our proprietary data insights, we expect strong demand for our properties to continue.”

The company has also sustained its leading liquidity position with about $5.2 billion in cash and availability on its credit facilities.

I continue to appreciate what I see with this REIT. If it can keep up this stability, it should be able to continue delivering organic growth – maybe even through the recession.

Author’s Note: If you do determine this stock is right for you, make sure to purchase it at a smart entry point. Even the best of companies can burn you badly if you buy in at inflated prices.

Happy Investing

Brad Thomas

467 posts

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Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.

Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.

Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.

Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.

Here’s Some Data Behind the Employment Headlines

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

A Major Recession Indicator

Brad Thomas

467 postsAugust 8, 2022

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A Major Recession Indicator

467 postsAugust 8, 2022

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