SCHH: A Solid Fund For The REIT Catch Up

seekingalpha05-21

REITs are the weakest sector in 2024, with the Real Estate Select Sector SPDR Fund ETF down 3.84% for the year.The shift in rate expectations and rally in long-term yields have contributed to the ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSCHH: A Solid Fund For The REIT Catch Up\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-21 23:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694779-schh-a-solid-fund-for-the-reit-catch-up><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>REITs are the weakest sector in 2024, with the Real Estate Select Sector SPDR Fund ETF down 3.84% for the year.The shift in rate expectations and rally in long-term yields have contributed to the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694779-schh-a-solid-fund-for-the-reit-catch-up\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":null,"symbol_name":null,"start_time":0,"source_url":"https://seekingalpha.com/article/4694779-schh-a-solid-fund-for-the-reit-catch-up","article_id":"2437447514","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1688771026/image_1688771026.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2437447514","pubTimestamp":1716305769,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The macro backdrop is looking bet","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{},"translate_title":"SCHH：房地产投资信托基金的稳健基金迎头赶上","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XLY":1,"XLRE":1,"CFA.SI":1,"REIT":1,"SCHH":1,"US3Y.BOND":0.9,"US7Y.BOND":0.9,"US6M.BOND":0.9,"US5Y.BOND":0.9,"US30Y.BOND":0.9,"US2Y.BOND":0.9,"US12M.BOND":0.9,"US10Y.BOND":0.9,"FDN":0.9,"CFA":0.9,"US912797FH58.BOND":0.6,"US912797FS14.BOND":0.6,"US912797GB79.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6},"content_text":"REITs are the weakest sector in 2024, with the Real Estate Select Sector SPDR Fund ETF down 3.84% for the year.The shift in rate expectations and rally in long-term yields have contributed to the weakness, but the trend is shifting back due to softer inflation and a dovish Fed.The Schwab U.S. REIT ETF is a potential buy, offering diversification, decent returns, and a bullish pattern on its chart.   Richard DruryREITs are officially the weakest sector in 2024 as per the 11 Select SPDR Sectors. And by a long way: The Real Estate Select Sector SPDR Fund ETF (XLRE) is down 3.84% for the year. Second weakest is consumer discretionary (XLY) with a return of -0.82%. Much of this can be attributed to the hawkish shift in rate expectations and the rally in long-term yields. However, this is shifting back again, helped on by the softer inflation reading in May, cooler data and a dovish Fed. REITs have performed very well in the last month with a gain of 7.36%. It could be a good time to go REIT shopping again, and I am looking at the Schwab U.S. REIT ETF™ (NYSEARCA:SCHH) as a potential buy. Introducing SCHH  SCHH is a passively managed fund launched in 2011. It has $6.3B in AUM and a very low expense ratio of 0.07%. Its dividend is a disappointing 3.29%, due to the portfolio composition which does not select for yield. SCHH seeks to track the Dow Jones Equity All REIT Capped Index. As per the prospectus: The index is a float-adjusted market capitalization weighted index that issubject to capping constraints at each quarterly rebalancing. Theindex generally includes all publicly traded equity real estateinvestment trusts (REITs) with a minimum float-adjusted marketcapitalization of $200 million and a three-month median daily valuetraded of at least $5 million.   The Index excludes mortgage REITs and hybrid REITs, which leaves it with around 128 stocks spread out across the following sub-industries.    SCHH Sub-industries (Schwab)Capping means that the weight of any single stock cannot exceed 10%. It also limits the aggregate weight of all issuers that individually exceed 4.5% of the index weight to a maximum of 22.5%. Consequently, SCHH has less concentration in its top 10 and top 15 holdings than the other main REIT ETFs.    Holdings Concentration (ETFdb.com)The diversification is attractive, but as the index uses float-adjusted market capitalization weighted methodology, the top 10 holdings are familiar and differ from the likes of XLRE only slightly (by weighting).    Top 10 Holdings (Seeking Alpha)Indeed, the performance of the top REIT ETFs differ only slightly and they are all heavily correlated.    Peer Performance (Seeking Alpha)SCHH posts a decent return ; higher than VNQ, but less than FRI, which is a small fund by First Trust. What the above graphic really tells us however, is that these passively managed REIT funds all move to the same drivers and the macro environment is the most important aspect.  Why REITs?  The macro backdrop is looking better for REITs in the last month due to developments in rate expectations and yields.   SCHH v TLT (Tradingview) One major plus was the May FOMC meeting where Chair Powell made it clear further rate hikes were \"unlikely,\" even though inflation was not on the ideal path. This should put a floor under bonds and REITs unless there is some unforeseen inflationary shock down the line. Furthermore, the Fed's resolutely dovish stance sent a clear message; rate cuts are coming this year at the first opportunity. That may happen sooner than anticipated as inflation showed signs of slowing in last week's CPI report. Cooling in the economy may also be an influence and I suspect the Fed will cut at the first sign of anything concerning. Sentiment is also improving. This is an excerpt from Seeking Alpha news:  Funds flowed into The Real Estate Select Sector SPDR ETF this week, demonstrating optimism among investors of large real estate stocks. The fund saw net inflows worth $158.31M this week, compared to outflows worth $1.13M a week ago, according to data solutions provider VettaFi. SA's Quant Rating system changed its recommendation on the ETF to Hold from Sell this week, with a score of 2.55 on a scale of 5. Notably, the grade on XLRE's Momentum was changed to C from C- with the recent surge in the real estate stocks. SA analysts continue to rate the fund as a Buy.  Earnings are a weak point in the sector and SCHH has a PE ratio of 33.75. This is standard as the S&P 500 2024 estimate for REIT operating PE ratio is 34. Out of the 31 REIT stocks in the S&P 500 to have reported, 18 beat estimates and 9 missed. It has been a tough environment for REIT earnings, but it is slowly changing and the odds of \"higher for longer\" rates are much lower.  Technically, SCHH has the potential to form a bullish \"inverse head and shoulders\" pattern which complements the fundamental backdrop. This will trigger above the \"neckline\" at $20.40 and has a target of $25. Some investors will wait for this pattern to trigger, but this foregoes some of the potential profit and there is the risk the break-out fails. I tend to buy as low as I can and preempt the break-out.    SCHH Daily Chart (Tradingview)Risks The main risk is that inflation does not cool. While it does not necessarily need to drop to 2% for the Fed to cut - it only needs to look like it will at some point - if it continues on its current trajectory, it will be very hard to justify a cut this year. Indeed, a cut may only be implemented due to serious strains in the economy, which isn't the best backdrop for REITs or stocks in general.  A technical risk is that the chart above fails to trigger the bullish pattern and reverses lower around $20.40. This isn't terminal - the right \"shoulder\" can take time to develop sideways, but it could dip back near $18 and delay the rally by several months. A specific risk to SCHH is that it underperforms other REIT funds, but as there is so much correlation, this should be fairly minimal and is hard to foresee as it would relate to individual holdings and the differences in their weightings.  Conclusions  SCHH is a solid ETF in the REIT space. It is more diversified than XLRE and outperforms VNQ. A bullish pattern has formed on its chart and the macro backdrop is shifting favorably. REITS could finally catch up with other sectors and SCHH is a decent way to gain exposure.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2437447514"}