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Pro Says To Avoid Temptation To Buy This Beaten-Up Sector

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Pro Says To Avoid Temptation To Buy This Beaten-Up Sector

The real estate investment trust sector has been the worst-performing group in the S&P 500 index, and investors should not buy the dip, according to Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management.

What Happened

The real estate sector is among the most impacted by the COVID-19 pandemic amid multiple areas of uncertainties, Bapis said on a recent CNBC "Trading Nation" segment.

In the near-term, real estate companies face unknowns related to rent collections, financing debt and leverage, he said. 

Longer-term concerns relate to the work-from-home trend and what impact it will have on demand for physical office space.

"We're very cautious on the space," Bapis said. "I mean, I think earnings are going to be reset in general across all companies."

Why It's Important

Some investors take solace in the fact that REITs are known for paying healthy dividends. But, Bapis said this isn't reason enough to buy the beaten-up sector.

He said he is advising clients to "turn elsewhere" for yield, such as pharma, tech, telecom, banking and other sectors.

What's Next

If the real estate sector gets worse moving forward through a black swan event, a "highly levered asset like this is the richest part of the equity piece of the capital stack so last to collect," Ascent Wealth Partners managing director Todd Gordon also said on the "Trading Nation" segment.

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