IIPR - Innovative Industrial Properties Inc- US Housing Market Stocks Analysis

Companies / US Housing Mar 21, 2023 - 02:36 AM GMT

US House Prices Current State

My interim view as of early July 2022 based mainly on my stock market, economy and UK housing market analysis at the time (Stocks Bear Market Rally Last Gasp Before Earnings Season, US House Prices 3 Year Probability Range) concluded in an rough expectation for US house prices to target a gain of between 20% and 30% over the next 3 years that would be punctuated by a correction during 2023.

The latest Case Shiller 10 city index for November 2022 is 313, down form a peak of 330 in June 2022 (remember there is a 2 month lag in reporting of data). Thus US house prices have corrected by 5% from their highs though still positive on an 12 month basis at +6.3% which isn't anywhere near the shrill cries of the doom merchants such as Michael Burry of Mid 2022.

And given the background of soaring mortgage interest rates and contracting corporate earnings coupled with the inflationary cost of living crisis then +6.4% over the past 12 months is a sign of relative strength that suggests that yes US house prices whilst weak during 2023 are not going to fall off a cliff as many prospective buyers hope they will, after all the so called recession saw the US economy add 517,000 jobs last month, more than double market expectations! Thus the correction looks set to mild and prove temporary with prices set to resume their bull and likely to trade at new all time highs during 2024.

US Housing Stocks Mini Portfolio

Where housing stocks are concerned the more bad news the better which is the mistake most investors make when seeking good news to buy, countless times I get asked why am I buying x,y,z, stock when the news is so bad! We'll how else do you think you are going to get the stocks to trade down to a cheap prices? Not when the news is GOOD! You want the news to be BAD, DIRE, disastrous even because that is when one gets the greatest buying opps! It's why during October I looked like a porcupine given all the falling knives that I had tried to catch, which included a few US housing stocks though to very limited extent, pinprick exposures so as to get give me some skin in the game towards focusing on the US housing market.

IIPR - Innovative Industrial Properties Inc

The first REIT on my list that currently yields 7.7%, But unlike the usual suspects such as O, offers enough volatility to give one at least the chance of making X times ones investment whilst also receiving a high dividend. So how does IIPR achieve this minor miracle? By getting HIGH! IIPR rents out 'Medical' properties that are leased to Cannabis growers! So one gets access to the Cannabis sector without actually investing in Cannabis stocks that have proven very problematic when trying to invest in such stocks. For instance I was recently forced to sell all of my Jazz Pharma holdings Because Crest were set to cease trading in the stock due to it's Cannabis exposure, this despite the stock being listed on the Nasdaq. So IIPR kills 2 birds with one stone, exposure to US housing and exposure to Cannabis!

This is the kind of chart you want to see when gearing upto accumulate, the stock price PLUNGED on bad news, a falling knife that did a dead cat bounce. I don't see much more downside to this stock which looks set to retest the $82 low, this is what an accumulation zone looks like i.e $93 to $82, yes it could go below $82, but we will only know that with the benefit of hindsight, but one cannot buy with the benefit of hindsight. So given where we are I am accumulating IIPR between $92 and $82 with a few limit orders ranging down to $68 on the 'chance' that it breaks to new lows investing for the long-run.

The bottom line, high risk high reward small cap stock with exposure to the GROWING Cannabis Sector and the US housing market and given where the stock price sits barely off it's lows I will definitely be buying over the coming weeks.

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By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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