"A decline in home ownership is good for companies who have apartments to rent," notes The Dave Dyer Newsletter. To benefit from this trend, he looks at Avalon Bay (NYSE: AVB)." Here is his review.

"After a 10 year period of consistent increases from 1995 to 2005, the trend toward increasing home ownership has reversed and is now clearly in decline. The subprime problems and tighter credit policies will only serve to increase the decline.

"One of the easiest ways to invest in this trend is to buy shares in a REIT that owns apartment properties. Avalon Bay (NYSE: AVB.) is a REIT that manages high quality apartment communities in the high barrier-to-entry markets like California, the Pacific Northwest, the Northeast and Mid-Atlantic.

"In some cases, they develop their own properties; in others, they buy and remodel existing apartment complexes. They currently own 182 properties with about 52,000 apartments in total. AVB has 19 more properties under constructions and development rights for another 52.

"They are at the higher end of the rental market. In good times, they get more prosperous renters moving up, and in bad times, they get former homeowners moving down.

"With a market cap of $7.8 billion, AVB is one of the major players in the industry. Their revenue increased at a consistent 12% or 13% pace per quarter during the past year and they have increased profits in each of the past five years. They currently pay a 3.4% dividend.

"The stock has outperformed both the general market and the rest of the REITs over the past five years. AVB's stock price increased about 300% in the four years through the end of 2006, but decline almost 70% started in early 2007 with the first whiff of subprime problems, even though these problems should increase rental demand.

"The decline seems to have reversed as AVB gained 20% in recent weeks on strong volume. Part of the catalyst for this strength may be that a take-over offer for Post Properties -- another apartment REIT -- has reminded investors of the value in this sector."

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