By Tomi Kilgore

The Nasdaq 100 is known for almost always rising in July, but REITs have done even better, as they remain undefeated since 2008

The Vanguard Real Estate ETF has gained in all 18 Julys since 2008, and looks poised for a breakout to make it 19-0. In the real-estate sector, Prologis is a top pick from BTIG analysts.

There are never any sure things in financial markets, but there's one sector - which has remained relatively under the radar so far this year - that has had a perfect record during the month of July ever since the 2008 financial crisis.

And the charts, and history, suggest the win streak will remain alive as real-estate investment trusts look poised to have a banner month.

BTIG technical analyst Jonathan Krinsky said that "everyone knows" the technology sector almost always has a good month of July, as the tech-heavy Nasdaq 100 NDX has gained ground in 17 of the past 18 Julys since 2008. But he also noted that the real-estate sector, and specifically real-estate investment trusts, have actually one-upped the NDX.

The Vanguard Real Estate ETF VNQ is 18-0 in Julys since 2008, and has gained an average of 3.8% during those months, according to FactSet data. On Wednesday, the ETF rose 0.4%, while the NDX fell 1.5%.

There is some concern that REITs, known for their relatively high dividend yields, will be shunned by some income-seeking investors, given worries that stubborn inflation will lead to higher interest rates. Rising yields on Treasury notes, which are viewed as being safer than equity investments, tend to make REITs less attractive.

The VNQ ETF's current dividend yield is 3.59%. While that's higher than the yields of SPDR sector ETFs tracking the other 10 key S&P 500 sectors, it's well below the current 10-year Treasury yield BX:TMUBMUSD10Y of 4.48%.

But as Krinsky put it, the VNQ is entering its best month of the year "coiled below multi-year resistance," which suggests a breakout could be just around the corner.

"While tech gets all the attention in July, REITs stand out as the cleanest seasonal tailwind, with VNQ a perfect 18-0 in July since 2008...and a constructive technical setup where a break above $100 could open $110-$115," Krinsky wrote in a note to clients.

A five-year weekly logarithmic chart, which is based on percentage changes, for the VNQ.

As the chart shows, the VNQ has been trending higher for the past couple of years, and the timing looks right for it to rise toward multi-year highs.

Krinsky's target range coincides with the April 2022 weekly closing high of $110.48 and the record weekly close of $116.01 at the end of 2021.

That seems achievable, and if so the VNQ can make it 19-0.

Within the real-estate sector, the top picks of BTIG analysts are Prologis (PLD) and Regency Centers (REG). The analysts also view home builder D.R. Horton (DHI) as a top real-estate stock, even though it's not a VNQ components.

Meanwhile, J.P. Morgan added EPR Properties's stock (EPR) to its "Analyst Focus List," which include the firm's analysts' top ideas. Analyst Anthony Paolone said the reason for the pick is EPR's high dividend - the current yield is 6.4% - that he sees as "safe and growing." He also believes earnings growth is likely to be toward the top of the REIT peer group.

-Tomi Kilgore

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