I’d avoid Blackstone Mortgage (BXMT) and buy these 2 REITs instead

on Dec 7, 2023
  • Carson Block of Muddy Waters Research has shorted BXMT.
  • He believes that the company will need to cut its dividend in 2024.
  • To play safe, I’d avoid the stock for now and buy safer REITs instead.

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I wrote about Blackstone Mortgage Trust (BMXT) in June and recommended buying the stock with a 16% upside. That outlook worked really well as the stock surged by over 31% and reached the year-to-date high of $23.15. 

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Now, however, the stock has come under intense pressure after Carson Block, a well-known short-seller, has predicted that the company will likely cut its dividend in 2023, allegations that BXMT rejected. As a result, the BXMT stock price crashed to the support at $20.50, its lowest level since November 2nd.

It is unclear whether Carson Block’s prediction will be accurate. However, in the past, his views have worked quite well. He released a short report on SunRun, a solar company whose shares have dropped by 64% since June. His other recent shorts include companies like Lemonade, DLocal, and Chinook Therapeutics.

Therefore, there is a likelihood that BXMT stock price will show some volatility in the coming months as investors assess these risks. Technically, the stock is also not doing well. As shown below, the shares have formed a triple-top pattern at $23.15. The neckline of this pattern is at $18.96. 

In price action analysis, this pattern is usually a red flag. It has also moved below the 200-day moving average. Therefore, there is a likelihood that the BXMT share price will drop to the neckline at $18.96. A break below that level will see it drop to the support at $15. 

Therefore, with Blackstone Mortgage having negative headlines and weak technicals, it makes sense to stay in the sidelines for now. On Tuesday, I highlighted the three REITs I am buying, including Simon Property Group, SL Green, and Vornado Realty. Here are two more that I would consider.

BXMT stock

BXMT chart by TradingView

VICI Properties

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VICI Properties (NYSE: VICI) is a giant REIT that focuses on the experiential sector. The company operates in industries like casinos, entertainment, and hospitality. It houses some of the biggest companies in the industry like Caesars, MGM Resorts, and Penn International. It owns the Venetian, one of the most iconic buildings in Las Vegas.

VICI is highly concentrated, which is a big risk. However, this risk is offset in the way its leases are structured. It operates under a long-term, triple net lease with an average lease term of 41.5 years. This makes it a relatively stable company that has grown its AFFO by 7.23% in the past four years. 

In its most recent quarter, the company decided to increase its AFFO guidance for this year to be between $2.17 billion and $2.18 billion. This adjusted AFFO growth rate will be about 11%. Also, it has a solid balance sheet with over $3 billion in total liquidity, including $430 million in cash and $2.3 billion in its revolving credit. It also has access to $250 million in its forward sale agreements.

Technically, VICI has moved above the 50-day and 200-day moving averages. It has also formed a descending channel pattern. A break above the upper side of this channel will lead to more upside in 2024.

VICI stock

Alexandria Real Estate 

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Alexandria Real Estate (NYSE: ARE) is another cheap REIT I’d consider buying. The company builds and operates laboratories for leading pharmaceutical companies in the world like Pfizer, Merck, and Moderna. Most of its properties are in places like Boston, San Francisco, and San Diego. 

The company has a few advantages. First, it operates in a unique category that is hard to replicate. This is unlike other office REITs that operate normal buildings that are not regulated. Therefore, focusing on the life sciences industry makes it a bit insulated.

Second, ARE has a solid balance sheet, with most of its debt being at a fixed rate. This means that directly, it is not being affected by the soaring interest rates. Its weighted average maturity average stands at over 13 years. 

Technically, the stock seems to be in an uptrend now that it has already moved above the 200-day moving average. It is also approaching the important resistance point at $128, the highest swing in July. 

ARE stock
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