(FORTUNE Magazine) – Real estate investment trusts, or REITs, are generally seen as alternatives to stable investments such as bonds or money markets. Lately, however, they've been posting techlike returns. Over the past 12 months, the Morgan Stanley REIT index has risen 46%, nearly matching the return of the Nasdaq. In fact, the index has gained 117% in the past four years, making it one of the best asset classes in the market.

Will the run continue? "It's hard to make a great case for most real estate stocks at this point," says Morningstar analyst Dan McNeela. "Valuations are getting a little stretched." Researchers at the Leuthold Group agree. The firm eliminated its 4% REIT stake from its core portfolio in December.

Still, REITs come in a variety of flavors, and bulls believe there are still pockets of opportunities. Moreover, because REITs must pay out more than 90% of their earnings as dividends, they tend to have high yields of 5% to 10% or more.

One area fund managers like now is the apartment sector. Companies that invest in residential rental property have been hurt by job losses and low mortgage rates, which prompted many tenants to stop renting and buy houses. However, Ken Statz, co-manager of the Security Capital U.S. Real Estate fund, believes that as the economy recovers and rates gradually rise, apartment occupancy will bounce back. Statz is bullish on AvalonBay Communities (AVB, $53). It manages luxury apartments in upscale communities primarily in California and the Northeast and has a dividend yield of 5.3%.

Some fund pros also like hotel REITs. Ken Heebner, who has 18% of his CGM Realty fund invested in this sector, likes LaSalle Hotel Properties (LHO, $22), among others. The slowdown in business travel stemming from the sluggish economy has hurt LaSalle's portfolio of 17 hotels, which includes Marriott and Sheraton properties. But Heebner points to improving corporate profits as an early sign of a turnaround for hotels. "Business is bad, but it's getting better," he says. Meanwhile, LaSalle yields about 4%. You won't get that kind of income from your average tech stock. --David Stires