The Flight-To-Quality Trade

Over the years, Realty Income has evolved into a massive Net Lease REIT with 4,980 properties located in 49 states and Puerto Rico. As you can see below, the company has a highly diversified portfolio spanning 49 states (not in HI).

Summary

  • What is the safest REIT to own in a period of global uncertainty?
  • The flight-to-quality phenomenon occurs when investors sell what they perceive to be higher risk investments and purchase safer investments.
  • I filtered out the SWANs that appear best-positioned to mitigate global uncertainty and deliver on the promise of protecting principal at ALL costs.

A few days ago, I was speaking with an investor about the ongoing fears in North Korea and he asked, “what is the safest REIT to own in a period of global uncertainty?”

I pondered the question and thought to myself, “what is the safest REIT amid a period of worsening fear – not only in North Korea but also other negative headlines from the geopolitical front?”

It’s funny, for stocks, both foreign and domestic markets usually exhibit weak share price performance when headlines are unfavorable.

However, certain stocks (and of course that includes REITs) are better prepared to perform better during periods of chaos, Thomas Kenny explains,

“The flight to quality is the dynamic that unfolds in the markets when investors are more concerned about protecting themselves from risk than they are with making money. During times of turbulence, market participants often will gravitate to investments where they are least likely to experience a loss of principal.”

The flight-to-quality phenomenon occurs when investors sell what they perceive to be higher risk investments and purchase safer investments. This is considered a sign of fear in the marketplace, as investors seek less risk in exchange for lower profits.

Let’s face it, we are living in an uncertain world, and the safest stocks to own are also what I describe as the one’s that help you “sleep well at night.”

To select the overall safest REIT, I decided to dig deep into my “Intelligent REIIT Lab” (included in the Forbes Real Estate Investor newsletter). Within the list of 125+/- REITs in the lab, I filtered out the SWANs that appear best-positioned to mitigate global uncertainty and deliver on the promise of protecting principal at ALL costs.

Now let me tell you about my #1 Flight-to-Quality trade…

The Basic Net Lease REIT Overview

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