Now that the teams have been announced for the NCAA Men’s and Women’s basketball tournaments, the annual ritual of completing tournament brackets is underway for millions of fans.
Methods for picking winners in a 68-team bracket can vary greatly. Some will utilize data such as a team's free throw and three-point percentages, steals and rebounds. Others may follow a high-profile player or successful coach, or perhaps use more obscure criteria such as favorite team colors, the winning mascot in a hypothetical cage-match battle, or which school has a catchier fight song.
And always lurking in the background are the “Cinderella” teams, who, despite having little recognition and star power, seem to find their moment, execute on fundamentals and upset one or more of the favorites.
For investors, the ongoing portfolio assessment process can be a bit like filling out a tournament bracket – ingesting copious amounts of data, deciphering narratives and identifying both favorites and potential Cinderella's for allocations.
We highlight REIT valuations, using the S&P 500 Index earnings yield versus Real Estate Investment Trusts (REITs) Adjusted Funds from Operations (AFFO), as a potential Cinderella indicator. Except for the Great Financial Crisis (2009) and the COVID-19 pandemic (2021), earnings yield spreads are at historic lows.
Property fundamentals have stabilized for most property types with high occupancy rates and healthy growth in net operating income and are generally in better shape than the persistent negative perception since COVID-19 drawdowns.
With earnings yields indicating they are undervalued relative to the S&P 500, REITs are emerging as a compelling Cinderella story, offering an attractive option for investors seeking both growth and income.
Important Disclosures & Definitions
Basis Point (bps): a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.
S&P 500 Index: widely regarded as the best single gauge of large-cap US equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization. One may not invest directly in an index.
AAI000912 03/25/2026