iQ Total Real Estate Model
INVESTMENT OBJECTIVE
The iQ Total Real Estate Model attempts to capture profits by selecting securities from the Construction and Real Estate Investment Trust industries with strong fundamentals, valuations and price momentum versus their peers.
The iQ Total Real Estate Model is unique in that it includes stocks from the Construction industry in order to create a portfolio more representative of the Real Estate sector as a whole.
PROCESS:
Define the Investment Universe:
Start with stocks in the Real Estate sector and related industries.
Apply size and industry filters:
Focus on companies with meaningful market capitalization.
Restrict to relevant real estate sub-industries (e.g., excluding outliers outside core real estate exposure).
Score Stocks Using Two Specialized Sub-Models: Each qualifying stock is evaluated and ranked using two complementary factor sets:
First Sub-Model (Momentum / Risk-Oriented): Ranks stocks on a combination of:
Short-term price momentum (9-period relative strength measure).
Value momentum (a blend of value and price trend).
Beta measures (36-period and 60-period) to control for market sensitivity.
Second Sub-Model (Quality / Profitability-Oriented): Ranks stocks on similar industry and momentum filters plus:
Return on Assets (a key profitability and efficiency metric).
Create Composite Ranking: Combine the scores from both sub-models into an overall rank. The model emphasizes stocks that show strong relative performance, reasonable risk characteristics, and solid operational profitability within the real estate space.
Select & Weight the Portfolio:
Rank all qualifying real estate stocks by the composite score.
Select the top 10 stocks.
Equal-weight the 10 holdings (long-only; no leverage).
This model reconstitutes every February, May, August and November
Why invest in REITs?
Real estate investment trusts (REITs) are a type of investment that allows investors to invest in real estate without having to purchase and manage physical properties themselves. Here are some potential benefits of investing in REITs:
1. Diversification: REITs invest in a wide range of properties such as apartments, office buildings, warehouses, hotels, and shopping centers. This allows investors to diversify their portfolio and reduce overall investment risk.
2. Passive Income: REITs generate income through rental income and capital appreciation. They are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends, providing investors with a steady stream of passive income.
3. Liquidity: Unlike owning physical properties, REITs are publicly traded on stock exchanges, which means they offer the liquidity of a publicly traded stock. This makes it easier for investors to buy and sell their shares.
4. Potential for capital appreciation: REITs can also provide potential for capital appreciation over the long term as the underlying real estate properties appreciate in value.
It's important to note that like any investment, REITs also have their own risks
REITs are investment vehicles that own, operate, or finance income-generating real estate. Investing in REITs involves risks, including possible loss of principal. REITs may be affected by changes in property values, interest rates, and economic conditions. The performance of REITs can fluctuate and may not correlate with other asset classes. Investors should carefully consider their financial objectives, risk tolerance, and consult with a qualified financial professional before investing in REITs. Past performance is not indicative of future results. It is recommended to conduct thorough research and due diligence regarding specific REITs before making investment decisions. Please keep in mind that real estate is subject to local market conditions and other factors, which may impact the performance of REITs.