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Strategies & Market Trends : Value Investing

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To: MNTNH who wrote (52955)	12/7/2013 9:52:01 AM
From: E_K_S	of 78717

CLOUD REITs - Another one to add to your list QTS Realty Trust, Inc. (QTS) - This is a recent IPO that I have been watching; no position The company IPO'ed at the high end @ $21.00/share. My value at the time was $19.00/share but could be lower based on your observation of the sector and it's competitors. The stock did trade as low as $19.5/share and now is around $20.5/share. Their properties are only in the U.S. so there is no foreign exposure that I thought was a plus but not so sure now. Here is a link to their data centers. According to their IPO prospectus, full year distributions will total $1.16/share. At $20.50/share that is a 5.7% yield. My $19.00/share price valuation was based on a yield of 6% which is the current yield I am looking for in similar REITs. My biggest concern is that the growth expectations may be too high and I am not sure they have the future pricing power that they may have had in the past. I have a GTC buy in at $17.5/share. FWIW, I am still focused on U.S. based REIT's and MLP's that yield 6% or more and have at least 3 years of sustained growth prospects in their operating space. I am finding these values in the oil & gas midstream gathers w/ processing facilities & storage and distribution companies that continue to build out their infrastructure to satisfy all the new NG & Oil wells in the rich U.S. domestic shale region(s). Many are at/near operation capacity and are spending big capx to expand their reach and/or current processing capacity. I am focused on the fee based smaller/newer facilities in emerging areas, that should have excellent growth potential w/o significant new infrastructure investments. My bet is that these prospects only need to fill their current capacity w/ new long term clients if/when new wells come online. I just do not see those growth prospects in the data center space since emerging technologies and pricing may/could impact their future revenue streams even as marginal capacity and/or demand increases. There are too many moving parts in that space for me to make a long term bet unless I can buy the properties at a significant discount to the current price. I do think more users will move their application to the "Cloud" but I am not so sure that the REIT data centers are the best way to invest in this growth (that will translate into higher income and larger future distributions). Maybe a potentially better area is to find the consultants and/or engineers that help design and build these data centers and somehow tap into their fee based revenue streams w/o having to pay up for the huge capital outlays in land and real estate. EKS

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