Editor’s Note: Our experts here at INO.com cover a lot of investing topics and great stocks every week. To help you make sense of it all, every Wednesday we’re going to pick one of those stocks and use Magnifi Personal to compare it with its peers or competitors. Here we go…
Real estate investment trusts, or REITs, have existed here in the U.S. since the 1960s. The mature American market means there are some interesting subsectors where investors can gain exposure.
One such asset class is infrastructure. American Tower (AMT), Crown Castle (CCI), and SBA Communications (SBAC) are the second-, fourth- and 11th-largest U.S. REITs. All three own communication towers across the country, which are leased out to mobile phone services providers, radio and TV broadcasters, government bodies, and other companies.
The other type of infrastructure popular in the REIT space is data centers. The third- and 10th-largest REITs, Equinix (EQIX) and Digital Realty (DLR), both own and lease data centers to technology companies requiring immense amounts of digital storage space.
However, the data center REITs have come under criticism. In 2022, well-known short seller Jim Chanos said he was raising money to bet against such companies, predicting that the tech giants currently renting the space would look to develop their own data centers going forward.
As Chanos put it, “…although the cloud is growing, the cloud is their enemy, not their business. Value is accruing to the cloud companies, not the bricks-and-mortar legacy data centers.”
Chanos also pointed to a wider issue in the REIT space: the risk that many are overvalued.
According to numbers compiled by FactSet, the average S&P 1500 REIT is priced at 2.39 times net asset value (NAV) and 40.2 times earnings. Also, the average S&P 1500 REIT’s net debt is 1.36 times its NAV.
However, the high multiples on REIT shares come from the fact that they have lots of exposure to high-growth sub-sectors, such as self-storage, healthcare, student accommodation, and the aforementioned infrastructure.
What we want to do this week is to compare a REIT in the sub-sector that Chanos doesn’t like — Digital Realty — and the largest of the communications tower REITs, American Tower.
The easiest way to do that is to ask Magnifi Personal to do it for us. It’s as simple as asking this investing AI to “Compare AMT to DLR.”
This is an example of a response using Magnifi Personal. This image is not a recommendation or individual advice. Please see bottom disclaimer for additional information, including INO.com’s relationship with Magnifi.
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As you can see, over three years, AMT comes out on top in terms of both returns and volatility.
This ability to have an investing AI pore over reams of data for you in seconds and spit out an easy-to-understand comparison of two or more stocks is an invaluable tool in deciding where to invest next.
We highly recommend you try it out. Click here to see how.
Magnifi Personal makes research like this as simple as typing a question. You can easily do this yourself, or ask Magnifi Personal to add other measures to the comparison, including dividend, valuation metrics such as P/E or P/B ratios, gross margin, and more. Just click here to see how to set up your Magnifi Personal account.
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