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A Worrisome Market: 2 Top Buys For Yield


  • The spooky market may have you scared.
  • We’ve spotted some buy ratings in this worrisome environment.
  • Investors should be looking for lower-risk securities.
  • Looking for a portfolio of ideas like this one? Members of The REIT Forum get exclusive access to our model portfolio. Get started today »

This research report was produced by The REIT Forum with assistance from Big Dog Investments.

The market has become scary.

Opportunities seem to be drying up.

Au contraire, the opportunities are everywhere if you take a moment to look.

We will go over 2 buy ratings today and an investment we decided to cut back on significantly.

Triple net lease REIT

STORE Capital (STOR) gets a buy rating. Yeah, STOR! You may remember STOR from prior months where we considered it a great company at a terrible price. Falling from $40 to $32.86 creates a much more attractive price.

Source: The REIT Forum

For what it’s worth, we would still be bearish on STOR if shares were trading near $40.00. STOR benefits from great management, a reasonable balance sheet, extremely long leases (great during recession fear), and a knack for accretive growth. An era of low-interest rates would be ideal for triple net lease REITs. The risk rating of 2 is as high as we expect to go on any new positions in equity REITs right now.

STOR benefits from a unique strategy for direct origination:

Source: STOR

They were able to achieve an efficient scale on a “direct origination” platform.

What does that mean? The platform enables them to buy properties directly from small owners. They require additional details on the business so they can ensure that the properties they own are critical to the tenant. The tenant can still agree because STOR can access the capital markets at a dramatically lower cost than the tenant. The result is arbitrage. The tenant unlocks cash that was tied up in their portfolio, but the cost of rent is easier than bearing debt.

They issued shares at a low price, once. Precisely once. They did it when the market was in a panic and

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This article was written by

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Analyst’s Disclosure: I am/we are long ANH, CMO-E, COLD, PSB, STOR, WPC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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