If I asked a hundred investors to name me the #1 ranked industry at this time, I don’t believe anyone would guess it right. There would be a lot of focus on defensive stocks like pharmaceuticals. Or maybe a discussion of online businesses that are benefiting from the Stay @ Home, Work @ Home trends.
But they would be wrong!
In reality the #1 ranked industry out of 123 according to our POWR Industry Rank is the REIT-Data Centers group. The reason why is now dawning on you that the more we are at home…the more we are online…the more data we are all consuming. Now let’s talk about the top 3 stocks in the group: Digital Realty Trust (DLR - Get Rating), Equinix (EQIX) and CoreSite Realty Corporation (COR).
While many traditional (tangible) real estate investments have declined amidst the coronavirus pandemic, DLR is seeing the opposite. The company’s data center locations are proving critically important for the storage of the seemingly never-ending amount of digital information. And now that many more businesses are pivoting to cloud computing as the workforce continues to migrate away from traditional offices toward WFH (work from home) setups, the better it is for DLR.
This strength explains why DLR is up 14.9% on the year while most other stocks are down 20-40% (and airlines, hotels, restaurants and oil down 50-80%). That gain is on top of the 148% gain going back 5 years. The point being that DLR is not just a “johnny come lately”…it has been attractive for quite some time.
Looking ahead DLR hopes to retain its current clients and continue to expand operations during the coming digital transition. At the moment, the company has more than 2,000 clients that make use of its 260+ data centers. This has analysts excited about the growth prospects including Jacob Kilstein of Argus Research who recently reiterated the Buy rating on DLR with $148 target. And hey…don’t forget DLR is a REIT that also pays a dividend yield north of 3%. That extra income certainly helps the overall investment equation.
EQIX is a managed IT services provider that truly is a sector superstar thanks to its global network-neutral data centers. The company actually has a total of three headquarters, ensuring a strong foothold in markets throughout the developed world. All in all, EQIX has International Business Exchange data centers in 55 markets spanning five continents.
Just like DLR it is in positive territory on the year at +7.5%. And EQIX sports an even more impressive 197% gain going back 5 years. But what matters most is the future. And on that front, 5 Star analyst, Brett Feldman of Goldman Sachs, was pounding the table this past week that EQIX is easily worth $730 per share. That, plus a history of strong earnings gains, makes EQIX a very appealing pick at this time.
CoreSite Realty Corporation (COR)
COR investors have been on quite the rollercoaster ride since early February. That’s because before the Coronavirus even came on the scene they served up a disappointing earnings report that had shares tanking hard. But now, just like DLR and EQIX, investors understand that their services are in high demand which has COR bouncing back into positive territory on the year.
Let’s talk a bit more about CoreSite’s unique offerings. They focus on data center product provider’s power, cooling and digital security systems. All in all, COR provides services to:
- Telecommunications carriers
- Media businesses
- Content providers
- Financial institutions
- Government agencies
A large part of COR’s appeal is its 4.21% dividend. Throw in the ever-growing digital wave triggered by the coronavirus outbreak along with that attractive income and you understand why COR shares will likely continue to outperform in the weeks and months ahead.
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DLR shares closed at $136.49 on Friday, up $1.48 (+1.10%). Year-to-date, DLR has gained 14.89%, versus a -22.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|DLR||Get Rating||Get Rating||Get Rating|
|COR||Get Rating||Get Rating||Get Rating|
|EQIX||Get Rating||Get Rating||Get Rating|