No. of Recommendations: 12
AVB has always been a little pricy for me, I buy mostly from the bargain bin, but at this price I might dabble in AVB or some other apartment REIT.

I do not believe that AVB is pricey, unless one believes that cap rates on really good properties in prime locations should be no different from all properties everywhere. AVB's property cap rates are, and should be, lower. As a result, the P/AFFO ratio for AVB should be higher than those of its peers. That makes the stock look expensive relative to, say, HME, AEC and MAA.

I prefer to look at NAV premiums. On that metric, AVB is not expensive at all, selling at an NAV discount of about 7%. That, in my opinion, is crazy cheap. Of course, if cap rates rise in the apartment sector, AVB stock will be less cheap. But there is no evidence of cap rates going up in this sector, or in any other sector. We should also keep debt leverage in mind when considering the "fairness" of REIT stock prices. And, here, AVB stands out, with a debt to estimated asset value of something less than 30%.

Mr. Market doesn't agree with me, as AVB has been an underperformer of late. However, I continue to add to my position at current prices, and believe that I will do well with it over any reasonable time period. Just my opinion, of course.

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