What makes NNN REIT (NNN) an attractive investment?

Artisan Partners, an investment management company, published its investor letter Artisan Mid Cap Value Fund for the fourth quarter 2023. A copy of the same can be downloaded here. In the fourth quarter, its ARTQX Investor Class fund returned 11.21%, the APDQX Advisor Class fund posted a return of 11.20%, and the APHQX Institutional Class fund returned 11.17%, compared with a return of 12.11% for Russell Average Equity Value Index. For the full year, ARTQX, APDQX and APHQX returned 18.15%, 18.25% and 18.35% respectively, compared to 12.71% for the index. The portfolio outperformed the market with double-digit gains, but trailed the Russell Mid-Cap Value Index in the fourth quarter. However, it outperformed in the previous three quarters, leading to strong results compared to the index and peer group for 2023. In addition, please check the fund’s top five holdings to know its top picks in 2023.

Artisan Mid Cap Value Fund filed shares like NNN REIT, Inc. (NYSE:NNN) in its Q4 2023 investor letter. NNN REIT, Inc. (NYSE:NNN) is a publicly traded REIT that invests in properties subject to long-term net leases. On March 26, 2024, shares of NNN REIT, Inc. (NYSE:NNN) closed at $41.96 per share. One Month Return of NNN REIT, Inc. (NYSE:NNN) was 2.94%, and its shares lost 2.12% of their value over the last 52 weeks. NNN REIT, Inc. (NYSE:NNN) has a market capitalization of $7.672 billion.

Artisan Mid Cap Value Fund stated the following regarding NNN REIT, Inc. (NYSE:NNN) in its Q4 2023 investor letter:

“In the early days of October, we made our only new acquisition of the quarter: NNN REIT, Inc. (NYSE: NNN). NNN is a real estate investment trust (REIT) that executes triple net leases – a type of lease in which the tenant pays, in addition to rent and utilities, three other property expenses: insurance, maintenance and taxes. Typical advantages of triple net rental REITs over other REITs include lower leverage, lower capital intensity and a more stable rental roster that contribute to the ability to smartly finance growth. NNN focuses on single-tenant freestanding buildings whose tenants are in the retail industries (eg, convenience stores, restaurants, gyms and car washes). Overall, NNN has been in the triple net business for 40+ years, has an experienced and conservative management team, and has operated successfully in and out of cycles. NNN’s approach is one of focus, discipline and creating economic value per share, which are traits often lacking in the real estate industry. As evidence, during a period of low capital rates and cheap leverage, NNN did not aggressively pursue acquisitions to improve short-term earnings, but instead extended the duration of its borrowings to lock in low funding costs. NNN has an average debt duration of 12 years, which is more than double the peer average. Importantly, this provides protection to NNN’s balance sheet in a rising rate environment, allowing the company to go on the offensive while other industry participants retreat due to rising borrowing costs. At the time of our purchase, the market’s desire to exit businesses with interest rate risk was not distinguishing between individual REITs and how they would perform in a higher longer interest rate environment. In NNN’s case, our acquisition was well-timed, as the stock rose 25% in the fourth quarter as inflation data indicated we may be past the peak of a rate-tightening cycle.”

An exterior view of a modern retail property that embodies an owner’s real estate investment.

NNN REIT, Inc. (NYSE:NNN) is not on our list of the 30 most popular stocks among hedge funds. At the end of the fourth quarter, NNN REIT, Inc. (NYSE:NNN) was held by 23 hedge fund portfolios, up from 24 in the previous quarter, according to our database.

We discussed NNN REIT, Inc. (NYSE:NNN) in another article and shared the best dividend REIT stocks to buy for 2024. Additionally, please see our Q4 2023 hedge fund investor letters page for more hedge fund investor letters and other main investors.

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Disclosure: None. This article was originally published on Insider Monkey.

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