CBAI 0922: Top holding overview AVB
AvalonBay Communities, Inc. (NYSE:AVB) is currently a Top 3 stocks in CBAI allocation of August 15, 2022. The machine learning algorithm analyzed historic performance of the stock based on the fundamental analysis.
The CBAI algorithm tells us that the performance of these particular concepts will contribute the most to the Market Cap and the share price in Q3’22.
So, throughout the next quarter look out for the AVB news that might affect the line items that are closely correlated.
The highest correlated concepts (or the line items from the financial statements) are listed and discussed below.
Balance Sheet:
Balance Sheet related metrics are the highest correlated concepts in our analysis. Balance Sheet is strong with $1.75 billion in liquidity in its unsecured credit facility with annualized net debt-to-core EBITDA of 4.9 times. Total Assets and Total Liabilities line items contributing highly to the market cap value.
Interest expense and Investments:
$4 billion development pipeline is accretive in the long run. Development pipeline is funded with long-term debt and equity which leads to a well-managed interest expense.
Revenue:
People’s preferences have changed during COVID plus additional pressure from smaller landlords might decrease the rate of revenue growth. But we all need a place to live and with its portfolio in premier coastal markets AVB saw a strong recovery. As of Q2’22 Same Store Residential rental revenue increased 12.9% Q/Q. Occupancy is at 96.4% and rents grew by 13.9%. But it has been widely reported that the rents and prices are going down. And in general, housing prices and rents tend to correlate. People preferring to live in suburban markets after COVID can be a concern as well. Given that AVB stock performance is closely correlated with revenue, watch this line item. However, overall housing shortage and obvious slow down in the housing market might keep renters in place.
Opex:
AVB is well-known for using tech innovations which will be driving the Opex line item down. Same Store Residential operating expenses increased 4.8% Q/Q as of Q2’22.
Overall, AVB has solid fundamentals with a strong balance sheet position, great located portfolio and a large development pipeline. The company targets properties in leading urban centers of its operating areas with higher rates markets. Expanding into the hottest non-core real estate markets.
Philosophy: CBAI (completed in 2021 after 3 years of development by a team of PhDs and data scientists) is a REIT strategy run by an AI and machine learning algorithm. The CBAI REIT product is a long-only long-term strategy with quarterly reallocation with about 40 REIT stocks held in the portfolio at any given quarter.
We do not have a crystal ball – we believe in data science and measuring what we can measure to decrease the risk. By rigorously applying the latest advances in machine learning and probability theory, we let the model stay objective in its allocations. The algorithm largely ignores the macro sentiment and does not take into account consensus estimates. It focuses on company fundamentals instead. See full Methodology.
We identify the top 25 factors that historically have been correlated the best with the future value of the REIT Market Cap. Every quarter we update the model through a machine learning loop to feed latest financial results. Analyzing the results for all public REITs allows us to optimize the returns in the portfolio with REITs that are most likely to have the highest share price based on the past fundamentals performance.
However, like every investing tool, CBAI algorithm has its limitations, and should not be used alone for making an investment decision.
Disclaimer: Capital Brain, Monetarex, Inc and its employees are not Registered Investment Advisors or Financial Planners. The research reports and AI/ML algorithms and other market intelligence are provided for information purposes only. Our research and AI/ML algorithms do not constitute investment advice and readers should not make any investment decision without conducting their own due diligence or consulting their financial advisor about their specific situation.
