Keepin' It Real  

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

REITs Getting Short Squeezed

  • The breathtaking surge in GameStop - along with a swelling number of heavily-shorted stocks - has sent shockwaves through financial markets amid an ongoing battle between institutional and self-directed investors.

  • Initially set into motion by a sharp vaccine-driven rally from many "COVID-sensitive" companies, a surge in self-directed investor participation has magnified the "short squeeze" phenomenon to extreme levels.

  • Mall REITs, along with a handful of other heavily-shorted REITs, have been swept up in the short squeeze frenzy. Six REITs have surged more than 50% this month while three have doubled.

  • Reversing the "Cheap REITs Stay Cheap" effect that defined 2020, the 15 most heavily-shorted equity REITs have jumped 44% so far this year compared to the modest 1% gain on the broader REIT average.

  • Hedge funds have historically been reluctant to short REITs due to high dividend yields. Ironically, the wave of dividend cuts last year opened the door to increased short interest.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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