Betting on a Real Estate Trust Rebound

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

The U.S. stock market closed the week nearly where it started, as the Trump rally took a breather. The Dow Jones fell 0.37% and the S&P 500 dropped 0.14%, while the NASDAQ eked out a 0.07% gain. The MSCI Emerging Market Index pulled back 0.71%.

The energy sector did rebound over the course of the week, with U.S. Silica Holdings (SLCA) and PDC Energy (PDCE) rising 4.56% and 3.09%, respectively.

This week’s Bull Market Alert recommendation takes you into the world of Real Estate Investment Trusts or REITs, a sector that just recently found its footing in the market, even as a former real estate salesman took the helm of the United States.

Denver, Colorado-based CoreSite Realty Corporation (COR) offers cloud-enabled, high-performance data center campuses. Operating across 17 data centers in eight key North American markets, CoreSite serves a broad range of clients, including telecommunications carriers, media companies, financial and educational institutions, and government agencies.

As the chart below confirms, CoreSite’s stock entered a strong uptrend over the past month.

COR 1-23

CoreSite Realty Corporation (COR) vs. the S&P 500 over the past month.

Here’s why I expect CoreSite to continue its strong recent run.

First, with the growth of cloud computing, the Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure, data center Real Estate Investment Trusts (REITs) like CoreSite are booming. CoreSite recently increased the occupancy rate of its data centers to 87.6%, which is near record levels.

Second, CoreSite’s business is growing by leaps and bounds. Total operating revenue for Q3 2016 hit $101.3 million, a 17.2% increase year over year. Funds from operations hit $0.90 per diluted share, representing 21.6% growth year over year. CoreSite also raised its dividend by 50.9% to $3.20 per share, which equates to an annual dividend yield of 4.54%. A fast-growing business that is also throwing off a lot cash is hard to beat.

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Third, CoreSite’s senior management is betting big on CoreSite’s own success. President and CEO Paul E. Szurek bought 7,000 shares for $68.92 per share on Dec. 5., lifting his overall holding in the company to 59,561 shares. The stock price has increased by 10.69% since then.

A lot of smart money is also betting on CoreSite. Investment legend Ken Heebner’s Capital Growth Management owned 95,000 shares of CoreSite at the end of the third quarter. Nine successful small-cap strategies I track also are betting on CoreSite’s success.

So buy CoreSite Realty Corporation (COR) at market today and place your stop at $76.00.

The options for this position are too illiquid to recommend.

Portfolio Update

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Nicholas Vardy
Nicholas A. Vardy

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