Photo taken in Davos, Switzerland
Getty
What do you think of when you hear “Davos”?
If you’re like most people in the world, you probably don’t think of anything at all. Which, for the record, is understandable. There’s no reason to beat yourself up about it.
Or perhaps it rings a very small bell, as if you know you should know it but it’s too far – too distant – in the back of your brain to easily recall.
Maybe you’ll recall it in the morning. Or randomly a few weeks down the road.
Even if you don’t, again, it’s okay. Unless you’re living in Switzerland, are a major skier (or have major skier friends or family), or you closely follow politics… Davos just probably isn’t on your radar.
So let me enlighten you.
For starters, Davos is a small, beautiful Swiss town located up in the Alps about 5,000 feet above sea level. As such, naturally, serious skiers are drawn to the intensely stunning and stunningly intense courses it features.
During the winter season especially, you’d better believe that place gets good snow. And just about everyone who goes there for that packed precipitation has nothing but good things to say about it.
This just so happens to be where the World Economic Forum meets every year. Summed up, the WEF is a political and professional summit where 2,500 international leaders, movers, and shakers get together to network, discuss ideas, and otherwise build up their already sizable egos over a four-day period.
And while they may – and do – bask in the opulent luxury set up around them, probably enjoying $400 steaks and similarly costly bottles of Chateau Cheval blanc…
The men and women at the World Economic Forum’s annual summit mean business.
Another Reason to Keep DAVOS in Mind
If I sounded like I was downplaying the WEF’s meeting of minds, more commonly called Davos, I’m not. While I’ll be the first person to point out how there’s a lot of ridiculousness that goes on there…
It’s powerful and influential amounts of ridiculousness: the kind that makes points and can, in fact, change economic courses on national and global levels.
That’s why the elites love it so much. Not just because of all the champagne brunches and bragging rights they get to enjoy for going.
It’s also because of the power. And the ability to obtain even more of it.
It’s at this point I’d like to introduce you to (or remind you of) a final reason why “Davos” is worth knowing a thing or two about these days. And that would be the DAVOS index I devised two years ago.
Here’s how I described it in a Property Chronicle article last year:
You’re likely familiar with “FANG,” the acronym popularized by TV business personality Jim Cramer. FANG represents the tech-heavy giants Facebook, Amazon, Netflix, and Google. Since FANG’s creation, Apple has been added… showcasing these voracious, forward-thinking, post-industrial heavyweights of the new future.
My REIT radar kept showing me a similarly tight collection of heavy hitters, so I sought something equally memorable but less fierce than FANG – and a bit more pleasant. I invented D.A.V.O.S. – standing for: Digital Realty Trust (DLR), American Tower Corp. (AMT), Ventas, Inc. (VTR), Realty Income (O), and Simon Property Group (SPG).
Different than a portfolio, this DAVOS index is made from arguably the most popular REITs on the planet , and is designed to help investors make sense of the REIT marketplace.
We’re talking about a very useful tracking tool here to get a good gauge of what’s going on.
An Update on DAVOS
As a basketball player, not a hardcore skier, I can’t compare the thrill of watching DAVOS at work to taking on a snow-packed slope. I would imagine we’re talking about very different kinds of experiences, anyway.
Likewise, I can’t promise the same level of authority or influence you’ll gain from tracking DAVOS as attending Davos. That is, after all, a pretty high bar to set.
But I can tell you that – after pairing it with other investing tools at my disposal – it’s led to some very interesting and profitable conclusions in the past.
And I expect it to continue working just as well going forward, hence the reason for this update.
Let’s see how the DAVOS index is doing and what we can conclude from it this time around. As you can see, these five REITs have returned 18% year-to-date and the average dividend yield is 3.7%. More interesting than that, these five REITs have returned an average of since the beginning of January 2010.
The reason that these REITs are popular is because they generate very reliable dividend growth – in 2020 they are expected to grow Funds from Operations by an average of 6%.
However, I must warn you, a few of these REITs, primarily American Tower, Ventas, Inc., and Realty Income, have become pricey, and I recommend waiting on a pullback. Our favorite pick today is Simon Property – shares now yield 5.0% and 22% below the company’s normal P/FFO multiple.
Source: iREIT
I own shares in DLR, VTR, O, and SPG.