Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 stocks made the list for top value stocks in the REITs - Specialized industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued REITs - Specialized Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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7 Undervalued REITs - Specialized Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the REITs - Specialized industry for Thursday, February 23, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the REITs - Specialized industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

AGNC Investment Corp’s Value Grade

Value Grade:

AGNC Investment Corp. provides private capital to the United States housing market, enhancing liquidity in the residential real estate mortgage markets and, in turn, facilitating home ownership in the United States. The Company invests primarily in agency residential mortgage-backed securities (Agency RMBS) on a leveraged basis. These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations, for which the principal and interest payments are guaranteed by a United States government-sponsored enterprise, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac, and together with Fannie Mae, the GSEs), or by a United States government agency, such as the Government National Mortgage Association (Ginnie Mae). It may also invest in other assets related to the housing, mortgage or real estate markets, which are not guaranteed by a GSE or United States Government agency.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

AGNC Investment Corp has a Value Score of 94, which is considered to be undervalued.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. AGNC Investment Corp’s shareholder yield is higher than its industry median ratio of 2.45%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. AGNC Investment Corp’s price-to-book ratio is higher than its industry median ratio of 1.00. This could make AGNC Investment Corp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at AGNC Investment Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. AGNC Investment Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 25.66. This could make AGNC Investment Corp more attractive because the lower P/FCF ratio indicates that AGNC Investment Corp is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Corenergy Infrastructure Trust Inc’s Value Grade

Value Grade:

CorEnergy Infrastructure Trust Inc. is a real estate investment trust (REIT). The Company is focused on energy infrastructure. The Company owns and operates or leases energy midstream infrastructure connecting the upstream and downstream sectors within the industry. Its assets include Crimson Midstream Holding, which includes an approximately 2,000-mile crude oil transportation pipeline system, including approximately 1,100 active miles, and associated storage facilities located in southern California and the San Joaquin Valley; MoGas Pipeline System, which consists of approximate 263-mile interstate natural gas pipeline in and around St. Louis and extending into central Missouri, and Omega Pipeline include approximate 75-mile natural gas distribution system located primarily on the United States Army's Fort Leonard Wood military post in south-central Missouri. Its upstream assets are used in the production of energy resources, including pipelines, and tank and separation facilities.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Corenergy Infrastructure Trust Inc has a Value Score of 97, which is considered to be undervalued.

You can read more about Corenergy Infrastructure Trust Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Diversified Healthcare Trust’s Value Grade

Value Grade:

Diversified Healthcare Trust, formerly Senior Housing Properties Trust, is a healthcare real estate investment trust (REIT). The Company is focused on healthcare and life sciences located throughout the United States. Its segments include triple net senior living communities that provide short term and long term residential care and other services for residents; managed senior living communities that provide short term and long term residential care and other services for residents; properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, and all other, including certain properties that offer wellness, fitness and spa services to members. Properties in triple net senior living communities segment include leased independent living communities, assisted living communities and skilled nursing facilities. Properties in managed senior living communities segment include managed independent living communities and assisted living communities.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Diversified Healthcare Trust has a Value Score of 96, which is considered to be undervalued.

Diversified Healthcare Trust’s price-earnings ratio is 0.5 compared to the industry median at 17.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Diversified Healthcare Trust more attractive for value investors.

Diversified Healthcare Trust’s price-to-book ratio is higher than its peers. This could make Diversified Healthcare Trust less attractive for value investors when compared to the industry median at 1.00.

You can read more about Diversified Healthcare Trust’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Hersha Hospitality Trust’s Value Grade

Value Grade:

Hersha Hospitality Trust is a self-advised real estate investment trust (REIT). The Company owns and operates luxury and lifestyle hotels in coastal gateway and resort markets. Its portfolio consists of approximately 28 hotels totaling 4,270 rooms are located in New York, Washington, DC, Boston, Connecticut, Philadelphia, South Florida, and select markets on the West Coast. The Company operates under brands owned by Marriott International, Inc. (Marriott), Hilton Worldwide, Inc. (Hilton), InterContinental Hotels Group (IHG), Hyatt Corporation (Hyatt), and Hersha's Independent Hotel Collection.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Hersha Hospitality Trust has a Value Score of 92, which is considered to be undervalued.

Hersha Hospitality Trust’s price-earnings ratio is 2.9 compared to the industry median at 17.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Hersha Hospitality Trust more attractive for value investors.

Hersha Hospitality Trust’s price-to-book ratio is higher than its peers. This could make Hersha Hospitality Trust less attractive for value investors when compared to the industry median at 1.00.

You can read more about Hersha Hospitality Trust’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Mfa Financial Inc’s Value Grade

Value Grade:

MFA Financial, Inc. is an internally-managed real estate investment trust that invests in and finances residential mortgage assets. The Company’s targeted investments include principally residential whole loans, including purchased performing loans, purchased credit deteriorated and purchased non-performing loans. The Company also owns residential real estate (REO); residential mortgage securities, including credit risk transfer securities, and MSR-related assets, which include term notes backed directly or indirectly by mortgage servicing rights (MSRs). The Company’s principal business objective is to deliver shareholder value through the generation of distributable income and through asset performance linked to residential mortgage credit fundamentals. The Company selectively invests in residential mortgage assets with a focus on credit analysis, projected prepayment rates, interest rate sensitivity and expected return.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Mfa Financial Inc has a Value Score of 83, which is considered to be undervalued.

Mfa Financial Inc’s price-to-book ratio is higher than its peers. This could make Mfa Financial Inc less attractive for value investors when compared to the industry median at 1.00.

You can read more about Mfa Financial Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

PennyMac Mortgage Investment Trust’s Value Grade

Value Grade:

PennyMac Mortgage Investment Trust is a mortgage real estate investment trust that invests in residential mortgage loans and mortgage-related assets. The Company conducts all its operations, and make investments, through PennyMac Operating Partnership, L.P. and its subsidiaries. Its segments include Credit Sensitive Strategies, Interest Rate Sensitive Strategies, Correspondent Production and Corporate. The Credit Sensitive Strategies segment represents its investments in credit risk transfer (CRT) arrangements, non-agency subordinated bonds, distressed loans and real estate. The Interest Rate Sensitive Strategies segment represents its investments in mortgage servicing rights (MSRs), excess servicing spread (ESS), agency and senior non-agency mortgage-backed securities (MBS) and the related interest rate hedging activities. The Correspondent Production segment serves as an intermediary between lenders and the capital markets by purchasing, pooling and reselling credit quality loans.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

PennyMac Mortgage Investment Trust has a Value Score of 95, which is considered to be undervalued.

PennyMac Mortgage Investment Trust’s price-to-book ratio is higher than its peers. This could make PennyMac Mortgage Investment Trust less attractive for value investors when compared to the industry median at 1.00.

You can read more about PennyMac Mortgage Investment Trust’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Seven Hills Realty Trust’s Value Grade

Value Grade:

Seven Hills Realty Trust is a real estate investment trust. The Company's investment objective is to balance capital preservation with generating attractive, risk-adjusted returns on its investments. The Company focuses on originating and investing in first mortgage loans secured by middle market and transitional commercial real estate. The Company invests in first mortgage loans, which have principal balances of approximately up to $75.0 million. The Company has approximately $37 billion in assets under management (AUM). It operates approximately 30 regional offices located throughout the United States. Tremont Realty Capital LLC is the investment manager of the Company.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Seven Hills Realty Trust has a Value Score of 78, which is considered to be undervalued.

Seven Hills Realty Trust’s price-earnings ratio is 5.7 compared to the industry median at 17.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Seven Hills Realty Trust more attractive for value investors.

Seven Hills Realty Trust’s price-to-book ratio is higher than its peers. This could make Seven Hills Realty Trust less attractive for value investors when compared to the industry median at 1.00.

You can read more about Seven Hills Realty Trust’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other REITs - Specialized Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about REITs - Specialized stocks as well as other industrys.

Choosing Which of the 7 Best REITs - Specialized Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• AGNC Investment Corp stock has a Value Grade of A.
• Corenergy Infrastructure Trust Inc stock has a Value Grade of A.
• Diversified Healthcare Trust stock has a Value Grade of A.
• Hersha Hospitality Trust stock has a Value Grade of A.
• Mfa Financial Inc stock has a Value Grade of A.
• PennyMac Mortgage Investment Trust stock has a Value Grade of A.
• Seven Hills Realty Trust stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 undervalued stocks in the REITs - Specialized industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About REITs - Specialized Stocks

Want to learn more about REITs - Specialized stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 7 Undervalued REITs - Specialized Stocks for Thursday, February 23
• 5 Undervalued REITs - Specialized Stocks for Wednesday, February 22
• 6 Undervalued REITs - Specialized Stocks for Tuesday, February 21
• 4 Undervalued REITs - Specialized Stocks for Monday, February 20

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.