Is There Any Upside to Real Estate Penny Stocks?

When it comes to investing in real estate, many people have chosen to put their money in stocks that operate and develop properties. For many reasons, this does makes sense when it comes to investing in real estate, as you are able to get a diversified portfolio instead of having all your money tied up in one property. The problem with investing in real estate through the stock market is that if other investors already involved and have pushed up the price of the stock, there might be danger in buying too late.
There are many signs that investing in real estate is looking like a solid option. The reports from the new home builders are that they are actually running out of supply, as they can’t keep up with demand. Many of the new home builder stocks are up already over 100% for the year. Investor sentiment has been building from extreme bearishness to extreme optimism. In fact, I think investor sentiment has gotten to the point of so much optimism that most of the good news, if not all of it, is priced in.
One example of a good way to start investing in real estate through the stock market is with a company like Thomas Properties Group, Inc. (NASDAQ/TPGI). Thomas Properties owns, develops, and manages a diversified portfolio of properties, comprised mainly of offices, along with some residential buildings. With a diversified portfolio, it tends to smooth out earnings, which can be a positive for investor sentiment.
An example of investor sentiment being too bullish is when one looks at the recent quarter earnings for Thomas Properties, ended on June 30, 2012. For the quarter, the net loss grew to $4.8 million, up from a net loss of $3.0 million in the prior year period. For the six months of 2012, the company incurred a net loss of $7.9 million, as compared to a net loss of $6.3 million during the first six months of 2012.
The company cites lower management and development revenue, as well as lower unit sales for condominiums. For someone interesting in investing in real estate, these are not bullish results, especially when one considers that, in many markets, real estate has had a very strong period during the first six months of 2012.
Nothing in life goes in a straight line. At some point, the move in the stock gets exhausted. While investor sentiment remains high on the stock, I would urge caution. With a decrease in the fundamentals of the company, and especially considering the huge move the stock has made over the past year, we would need to see a dramatic improvement in the business for a catalyst to continue driving the stock higher.
Source: http://www.pennystockdetectives.com/