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There are two pieces of money that I want to take a closer look at Alternative Income REIT (LSE: AIRE) and Equity (LSE: EBQ).
Let's get into the story of individual investments to help me decide whether I should buy certain stocks or not.
Alternative Income REIT
Set up as a real estate investment trust REIT), the Other makes money from income-producing properties. This can range from office space and housing to transportation and more.
One of the biggest benefits of investing in these types of trusts is that they are mandated to return 90% of profits to shareholders.
Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice.
On a positive note, I'm a fan of the Alternative variety. I have found that most REITs tend to focus on one type of property, be it real estate or healthcare, to provide a few examples. Some have assets across several industries. The good thing here is that diversification reduces risk.
Next, the shares offer a nice yield of 8.9%. This is much higher than FTSE 100 an average of 3.9%. However, I understand that benefits are not guaranteed.
And, based on its net asset value of around 80p per share, the shares are undervalued by 14%. Shares currently trade at 70p.
From a downward perspective, high interest rates put significant pressure on REITs from a rent collection, growth, and net asset value perspective. If these rates decrease, income and returns may increase. Although rates remain high, they present a real risk to shareholder value.
I would be willing to buy Alternative Income shares if I next have some free money.
Equity
The math for marketing and media consulting firm Ebiquity is complex. Firmly in the penny stock category, the business is small on paper, but there are many benefits when I dig into the investment case.
First, the shares look about 70% undervalued based on the discounted cash flow (DCF) model.
Next, the business has a good track record to fall back on. It has grown revenue each year at a rate of just over 6% over the past five years. While not a spectacular growth rate, it represents what looks like a steady ship in the volatile world of penny stocks. I understand that past performance is no guarantee of the future.
Finally, analyst forecasts point to impressive growth in the coming years. However, I always take analyst predictions with a grain of salt, especially for small stocks. He may not succeed.
If we look at evil, it is clear that Ebiquity is a small fish in a big pond. Competition from big firms in the space with big muscles for flexibility may present growth challenges going forward. Alternatively, it may be bought and swallowed by a larger company in the space. Also, marketing is often one of the first budget cuts when an economic downturn hits, like right now.
Overall I'll be watching Ebiquity shares for now, and may be tempted to buy them soon as things develop.
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