Alright, alright, alright — time for week number four! Now that we’ve had a few weeks of covering the more well-known and widely-praised stocks, it’s time to look at some companies that not everyone may know about. These companies are real estate investment trusts (REITs). These sorts of companies own and usually operate income-producing real estate. A REIT can specialize in any number of different real estate sectors, including office buildings, warehouses, apartments, shopping centers, and more.
Certain types of REITs tend to be more recession-resistant than most companies in other sectors, a fact that makes them even more appealing as we head into one. Industrial, communication services, and data center REITs, which are the respective classifications of my three stock picks, are more resistant because a) contracts with their customers are geared for the longer term and are thus less prone to economic fluctuations and b) the contracts are generally made with large corporations that are less likely to default than, say, an individual in an apartment. Without further ado, let’s dig into my top REIT choices.
Any company intertwined with Amazon’s rise to the forefront of e-commerce is a good buy. Prologis is Amazon’s main warehouse space provider and one of the largest warehouse providers in the world. As the trend toward e-commerce has accelerated due to the coronavirus, Prologis stands to take advantage of the increased opportunities to provide warehouses to retail companies. The company has plenty of capital to invest in growth and has billions of dollars in liquidity, meaning it is able to spend it whenever it may need (such as during a crisis). With the almost certain increased reliance on e-commerce in the future, few companies are as well poised as Prologis to capitalize on the potentially several trillion-dollar market.
American Tower (AMT)
This company owns telecommunications sites, or, in other words, cell towers. It owns around 180,000 tower sites around the globe and is one of the largest REITs in the world. AMT has demonstrated its ability to continue to grow, adding over 30,000 new towers since 2016 and increasing its revenue and profits every year but one since 2006. Already a dominant force in the wireless broadcasting industry, American Tower is ready to capitalize on the adoption of 5G technology. In previous articles, I have explained the potential of 5G to revolutionize the way we interact with technology, which is why the industry offers the potential to grow at an annual rate of 95% between 2018 and 2025. American Towers possesses the capital and market influence to make it a safe bet over the next few years.
Equinix owns and operates data centers that it rents out to companies. Data centers are facilities that house large amounts of computer systems, providing companies with the necessary computing power to run their businesses. Practically every corporation nowadays relies on software on some level, whether it be its product or its back-end operating system, so the market for rentable computer power is vast. As data and information develop increasingly important roles in the economy, the need for high efficiency and highly specialized compute power will only increase–a need that data centers, and thus Equinix, can fulfill. Equinix is the main player in the industry right now and, therefore, is in the most favorable position to capitalize on the almost certain high-level growth of data centers. The only problem with EQIX is its $750 price tag, so a decent alternative would be its competitor Digital Realty (DLR).
While our writers talk about these stocks, we are in no way giving the reader investment advice or urging them to buy any stocks. The goal of this series is merely to provide an opinion on certain stocks for the longer term; what our readers choose to do with this opinion is entirely up to them. This is not meant in any way to be investment advice.