A Smarter Way to Invest in Retail?

I like investing in retailers. They are simple businesses. When the concepts work, they are easy to grow. Retailers' volatility can provide buying opportunities as the stocks tend to overreact to meaningless same-store-sales and inventory data.

In this environment, retail has become a dirty word. You know the deal: consumer spending is dead, homes are no longer ATMs, we are in a recession, etc. The result of course is a sell off in retail stocks, which for contrarian value investors means the chance to scoop up certain names on the cheap.

Besides owning retail stocks--which I do--another way to profit from an eventual turn in consumer spending is by owning the stores themselves. Yup, I'm talking real estate. I own one mall REIT currently and am open to adding more shop space to my portfolio.

The Wall Street Journal reported this Wednesday: "Green Street Advisors, of Newport Beach, Calif., estimates that REITs on average now trade at a 9% discount to their net asset values. Traditionally, they trade at a 4% surplus on average. Various REIT categories are faring worse than the overall average, with mall REITs trading at a 32% discount, office REITs at a 15% discount and apartment REITs at a 13% discount, according to Green Street."

Here's my marketing suggestion for the investor relations folks at mall REITs: borrow a few tricks from your tenants. "32% off! Limited time only! Act now!"

PS - I've also blogged about cheap real estate here and here.