The stock market's rebound since the March plunge has been nothing short of remarkable. In fact, even though it plunged by nearly 40% at the lows, the S&P 500 is actually higher for 2020.
However, this doesn't mean we're completely out of the woods yet. The COVID-19 pandemic is ongoing, and while the early data looks promising, there's no guarantee that we'll have an approved vaccine or an effective distribution strategy in the next few months. And there's the election coming up, the seemingly never-ending stimulus negotiations, and other factors that could rattle markets. The point is that while there's a lot that has been going right and could continue to do so, there's also quite a bit that could go wrong, and another stock market correction or crash is a realistic possibility.
For long-term investors, a decline in the market doesn't need to be scary. Instead, it could be an opportunity to add high-quality stocks at a discount -- like these two top-notch real estate investment trusts, or REITs, that have been on fire in 2020.
One of my best-performing REITs, but with more upside potential ahead
Data center REIT Digital Realty Trust (NYSE: DLR) is one of the largest stock holdings in my portfolio, and it's one I've owned for some time. And it's also been one of the top performers: Over the past five years, the stock has generated a 178% total return. So far in 2020, the stock has gained another 23%, handily outperforming the real estate sector and the stock market as a while.
If you aren't familiar with data centers, think of them as the "homes" of the internet. To name a couple simple examples, when you access a document stored in the cloud or upload a photo album to your Facebook (NYSE: FB) page, all of that data has to physically live somewhere. And that's where data centers come in.
To put it mildly, the number of internet-connected devices and the volume of data being transmitted has grown exponentially over the past decade or so, and with the wide-scale rollout of 5G technology, there's no reason to think it will slow down. One of the world's largest data center operators, Digital Realty has 280 data centers in its portfolio and more than 4,000 customers using them, and I could see both of these figures growing significantly in the years to come.
Communications infrastructure is a long-tailed growth opportunity
The largest REIT of any kind in the world, American Tower (NYSE: AMT) is one I've had my eye on for some time, but quite frankly, valuation has been an obstacle. If the market crashes and it gets a little cheaper, I may have to jump in.
American Tower is an infrastructure REIT with a portfolio of about 181,000 communication towers (also commonly referred to as "cell towers") around the world. It leases space on its towers to many of the largest wireless carriers and other telecom companies.
I like American Tower as a long-term play for some of the same reasons I'm a Digital Realty Trust shareholder. For one, it's a recession-resistant business. People still need to maintain wireless data and voice services even if the economy tanks. And two, the need for wireless communications is likely to grow over time, and the rollout of 5G could be an especially nice tailwind.
Should you wait for a market crash to buy these?
First off, there's absolutely no guarantee the stock market will crash again in the near future, and even if it does, we could certainly see a lot more upside before it happens. And while buying stocks at a discount during turbulent markets is certainly preferable, that should be a secondary concern. The important thing is buying shares of great companies and holding onto them for as long as they remain great companies.