Anyone following the ASX A-REIT (Australian Real Estate Investment Trust) sector would have come across Goodman Group (ASX: GMG) – the largest REIT in Australia and new favourite of listed property enthusiasts everywhere.
Goodman has had a phenomenal 2019 so far, starting the year off at $10.68 per share before rising all the way to $16.10 in early July – a gain of approximately 60%. Although GMG shares have cooled somewhat since then, and are today going for $14.30, this REIT would still have an army of very happy investors today.
So what’s been the secret of Goodman’s success? Well, according to reporting in the Australian Financial Review (AFR), it’s the company’s focus on the future that is really driving investors wild.
In the AFR report, Goodman Group founder Greg Goodman is quoted as saying it’s the rise of online shopping that underpins the company’s success, both past and future:
Four or five years ago the collective wisdom in the property industry was that the growth in online retail sales would lead to an expansion of space devoted to logistics warehouses. It is not panning out that way…My personal view is that in five years’ time, a lot of our big customers will actually have less space but higher productivity. I think that’s the trick with industrial property and what will define it over the next five years.
The AFR report also notes that if things continue to go Goodman’s way, it won’t be long until the company steals the crown from the old Westfield as Australia’s most valuable property company of all time. Westfield was valued at $33 billion when it was taken over by European giant Unibail-Rodamco in 2018 – Goodman’s market capitalisation currently stands at $26.2 billion on today’s share price.
This focus on emerging trends in the economy rather than established ones has been a fundamental driver of Goodman’s growth – and I think it makes it the best REIT on the ASX today.
Although Goodman’s yield (1.78% on current prices) is not as plump as some other REITS out there, this (in my opinion) can be effectively countered by looking at Goodman’s expansion pipeline. From my perspective, investors could certainly do worse than GMG shares in today’s market .
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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