The gig economy just doesn’t seem to work on the stock market. While any IPO is liable to lose ground initially, there’s fast emerging a common thread among gig economy tickers. From Uber to Fiverr, the “odd job” sector has been taking a sound bashing from investors of late.
Uber may be trending higher at the moment, but the ride share outfit is trading well below its peak price in the region of -40%. Its poor cousin, Lyft, is faring even worse, having shed 50% of its peak price since debuting. And then there is Airbnb, which is looking decidedly unstable even before its 2020 IPO.
The rental app doesn’t match REITs
Let’s touch on why real estate investors should steer clear of that forthcoming gig economy IPO for a moment. Airbnb had originally been slated to debut this year, though the kibosh has been put on public shares for the time being. The official reason behind the delay is that the rental and experience app company simply doesn’t need the cash at this time, with a tentative listing date pushed to next year.
While this is by no means a bad complaint to have, investors who had been eyeing the listing with interest may now be in two minds about snapping up shares if and when Airbnb does finally go public. But there’s another reason now why real estate investors in particular may want to give the accommodation business a wide berth.
A tribunal in Ontario has come down on the side of the Toronto council and decided that Airbnb will have its wings clipped in the city. New restrictions will limit the rental service to homeowners’ primary residences with a total of 180 rental days a year. The decision is good news for the short-term rental market. 30% of current Airbnb listings will be affected, freeing up more than 50% of the market.
While Airbnb’s listing on the stock market will no doubt attract the general capital gains trader, real estate investors may want to consider steering clear in favour of more traditional stocks, such as REITs.
Canadian Apartment Properties REIT is a great choice for any investor with a super-wide financial horizons eyeing the climate change situation for a potential relocation boom. While any new trend in real estate offers opportunities, the potential for rising sea levels to affect the housing market means that residential REITs could see strong momentum over the coming years.
Known as CAPREIT to investors, this REIT offers some key advantages to first-time Canadian real estate investors. Its geographical diversification is one this REIT’s main selling points, from furnished apartment offerings in Dublin to a comprehensive spread of properties across the Netherlands. In addition to its residential Canadian assets, CAPREIT also offers commercial sites across the country.
The bottom line
CAPREIT is one of the best real estate investment trusts on the TSX to consider stashing in a long-term defensive income portfolio. With its wings clipped, Airbnb could go the way of other gig economy IPOs. Momentum investors may want to look elsewhere for more assured capital gains, while real estate investors may want to fall back on the dividends and reassurance of traditional REITs.
Motley Fool Canada's market-beating team of experts has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today.
Our team thinks these 5 stocks are critically undervalued right now, but more importantly, they could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies.