The 1.75 Threshold

Boston Properties’ (BXP) P/NAV spread to the REIT sector dropped below -1.75 standard deviations on 8/12 and then proceeded to reverse and climb back above the threshold on the very next day (8/13). 

Since the signal surfaced a week ago, BXP has outperformed the iShares US Real Estate ETF (IYR) by 90bp (1.67% vs. 0.77%).

It is rare for a blue chip REIT such as BXP to trade at these levels relative to the REIT sector. Historically when blue chip REITs breach such a level to the downside, they tend to outperform in fairly short order, meaning they don’t stay down for long. However, this isn’t always the case. BXP stayed at extremely low relative valuation levels for several months in 2013.

DISCERN Chart.  Data Source: SNL
DISCERN Real Estate Chart Blog

There is no sure fire methodology, but at DISCERN we believe through a thorough understanding of valuation, fundamentals and cyclical intricacies that profitable trading ideas can be surfaced through our robust valuation signal methodology.  To automate your own custom-generated charts and discover many additional insights like this one, learn more about DISCERN Real Estate.