The real estate investment trust (REIT) sector has turned in an impressive performance on the charts this year, as evidenced by the price action in the iShares U.S. Real Estate ETF (ETF). The shares of the exchange-traded fund (ETF) have surged 25.4% year-to-date (YTD), and hit the $94.20 mark earlier today -- a chip-shot away from their February 2007 record high of $94.99.
Underscoring this technical strength is data compiled by Schaeffer's Senior Quantitative Analyst Rocky White, which shows 61% of the 41 stocks that we track under the "real estate investment trusts" umbrella are trading above their 80-day moving average, boasting an average YTD return of 10.3%. Plus, these names sport a cumulative Schaeffer's put/call open interest ratio (SOIR) of 3.23 -- which shows short-term puts more than triple calls -- and a short interest-to-float ratio of 4.37, pointing to plenty of potential buying power to fuel more gains for REIT stocks.
Drilling down on individual names, New-York based Kimco Realty Corp (NYSE:KIM) has had a standout 2019, up 28.6% so far. Today, the shares are trading 0.8% higher at $18.88 -- brushing off a downgrade to "sell" at Compass Point -- and could see even more upside in the near term, if history is any guide.
Specifically, the stock is now trading within one standard deviation of its 160-day moving average following a recent pullback from its July 31 20-month high of $19.43. Data from White shows there have been five other times in the last three years KIM has pulled back to this trendline after a lengthy stretch above it, and the security was up 3.6%, on average, one month out, with 100% of the returns positive.
Spirit Realty Capital Inc (NYSE:SRC) is another REIT stock that may be flashing a buy signal. The shares are up 37.2% YTD, and tagged a two-year peak of $48.59 yesterday. SRC has since eased back from this peak, last seen at $48.38 -- 0.7% higher on the day.
Meanwhile, front-month implied volatilities (IV) are at historically low levels. SRC's Schaeffer's Volatility Index (SVI) of 17% registers in the 11th annual percentile, meaning short-term options have priced in lower volatility expectations just 11% of the time in the past 12 months. According to White, the one other time Spirit Realty was trading near new highs while its IVs were so low, the stock was up 7.1% one month later.
A round of upgrades and/or short covering could keep the wind at SRC stock's back, too. While 73% of covering analysts still say the equity is a "hold" or worse, a healthy 14.2% of Spirit Realty's float is sold short, or nine times the average daily pace of trading.