New Trade for June 8th, 2022

Stocks fell this morning in early trading, erasing some of the gains of the past two days as investors continue to grapple with signs of a slowing economy.  Adding to concerns around economic growth and surging inflation – Target (TGT) reduced its revenue guidance on Tuesday, saying it plans to slash its inventory and ordering in the second half of the year.  

“The market could continue to reflect concerns around financial conditions tightening and earnings growth slowing,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investment.  

As investors look for ways to improve their risk-return profiles, many are seeking out stability and companies that have a reputation for rewarding investors with regular payouts.  Today we’ll discuss a particularly attractive ticker from an asset class known for offering strength and stability during highly volatile periods.  This company also rewards investors with an impressive share of profits, making it a wise choice for anyone looking to shore up their long-term returns.  

Real Estate Investment Trusts (REITs), one of last year’s top-performing sectors, are popular among investors due to the booming real estate market, dividend advantages, and portfolio diversification. Commercial real estate is the third-largest asset class in the U.S., and REITs may provide a diverse mix of real estate assets and long-term total returns comparable to other stocks.

When rates rise, investors often forsake high-dividend-paying equities in favor of bonds, which offer a similar return but pose less risk and volatility. According to recent statistics, REITs have one of the lowest average risks, illustrating the performance of various asset classes following rate rises across three periods.  REITs did well throughout both high and low inflation eras. This implies they’re less vulnerable to prediction risk or the chance that investors accurately forecast periods of high inflation.

Life Storage, Inc. (LSI) is a self-storage REIT that invests in, owns, and manages self-storage facilities. It provides services for business, automobile, and wine storage. With over 1,000 sites in the United States and Canada, LSI owes to e-commerce driving warehouse demand and the requirement for product storage as well as the tech industry’s servers. Occupancy and rental rates have remained high due to supply chain concerns, which gives LSI an advantage over other REITs.

LSI has the robust financials we all look for in a stock. They have an impressive earnings report history, most recently beating quarterly EPS projections by 6.83% and revenue expectations by 4.78%. LSI shows very healthy year-over-year numbers, with notable revenue growth of 33.03% and EPS growth of 56.14%. Until reporting again, LSI offers $230 million in sales at 90 cents per share. LSI currently has a dividend yield of 2.75%, with a nice quarterly cash payout of $1.00 per share.  A consensus price target of $145.50 represents an increase of 24% over current pricing.  The consensus gives LSI a sturdy buy rating.