Compared to something like the S&P 500, the UK market still looks good value. This isn’t to say the momentum seen in share prices over the last year won’t come to a screeching halt.
One way around this would be for me to load up on a few of the best real estate investment trusts. This would help to diversify my portfolio and may provide some protection against a correction or market crash.
Reliable tenants
My first pick of the best real estate investment trusts to buy now is Primary Health Properties (LSE: PHP). This company owns purpose-built facilities which it leases out to GPs and government bodies.
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Unsurprisingly, rental income is about as predictable as it gets. Occupancy rates are also very high, at 99.6%. I can’t see this falling in the aftermath of the pandemic either. In fact, Covid-19 has served as a reminder of the importance of providing access to appropriate healthcare outside of hospitals.
Sure, PHP will never shoot the lights out. The share price has climbed a little under 50% since 2016. That’s clearly far less than I could have made elsewhere, highlighting arguably its biggest drawback.
Then again, massive gains aren’t the objective here. This is primarily a vehicle for protecting cash. It’s also a great income play. Right now, analysts have PHP yielding 3.7%.
Hot property
Another option if I were looking for downside protection, at least in my view, is Tritax Eurobox (LSE: EBOX). If the name rings a bell, that’s because the much larger, UK-focused Tritax Big Box is currently knocking on the door of the FTSE 100.
EBOX specialises in what might be regarded as ‘hot property’ at this point in time, namely warehouses. Thanks to the huge growth seen in e-commerce (and supported by the pandemic), retailers are crying out for more logistics space to hold their stock. This has helped send the share price more than 30% higher over the last year.
Yes, an economic slowdown may put an end to this momentum as people tighten the purse strings. Even if this doesn’t happen, we could see more money being spent on experiences as opposed to possessions for a while.
However, I doubt this will hold back EBOX for long. And at around a £750m market cap, the company has a lot of space left to grow. The shares also yield 3.5%, as I type.
Inflation-linked income
I think we can all agree that supermarkets are pretty defensive businesses. Since we all need to eat, it makes sense that cautious investors might want some exposure to this space.
If I didn’t want the hassle of picking a winner out from the pack, I could buy Supermarket Income REIT (LSE: SUPR). It aims to provide owners with inflation-linked income as well as capital appreciation over time. It does this by investing in omnichannel stores — large supermarkets that also operate as fulfilment centres for customers wanting home delivery and the option to click and collect. Its chief customers are the UK’s ‘big four’: market-leader Tesco, Sainsbury, Asda and Morrisons.
Will this approach deliver greater gains than investing in one of the companies mentioned above? Probably not. However, SUPR does boast a super forecast yield of 4.9%.
Like PHP and EBOX, I think this makes it one of the best real estate investment trusts to buy now.
