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Campus Crest: A REIT for Students

08/21/2014 8:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Based in Charlotte, North Carolina, our latest recommendation is s a real estate investment trust (REIT) that builds, owns, and manages student housing properties, explains Mark Skousen, editor of High-Income Alert.

Founded in 2004, Campus Crest Communities (CCG) has grown so rapidly that it is now the national leader—with more properties opening each year. It operates under the brand names The Grove, Copper Beech, and Evo.

With the job market weak—and placing a premium on knowledge-based workers—record numbers of students are enrolling in degree-granting institutions.

Between 2001 and 2013, national enrollment increased 32% to more than 21 million. That keeps student housing in high demand.

In the most recent quarter, however, Campus Crest missed earnings estimates by 6%, and the stock now trades near its 52-week low. That is creating a superb opportunity.

At current levels, Campus Crest sells for only three-quarters of book value, a real bargain. I estimate earnings per share will hit 70 cents a share this year and rise 20% in 2015. That means the stock is selling for less than 10 times prospective earnings.

And since Campus Crest is organized as a REIT, it must distribute 90% of its net income to shareholders each quarter. That means the current yield of 7.4% is likely to rise 20% in the year ahead as well.

At least one corporate insider seems to share my positive assessment. Executive Vice President Aaron Halfacre purchased 136,250 shares last week at approximately $8.13 a share, an investment of more than $1.1 million.

You should follow his lead. Buy Campus Crest Communities and place a protective stop at $6.75. But since this is a smaller stock, you may want to avoid buying it at $8.25 or above.

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