I have been writing on the datacenter space for a while (before it was "discovered" by many REIT writers here) and I have said that Digital Realty was an interesting company, and at one point, a good investment. Today they announced the acquisition of Telx. Interesting that they are buying a lessor of their space to get the clients, but... For a year I have been telling folks there is a better way to play the space. Enter QTS Realty Trust (NYSE:QTS).
On July 23, 2014 I stated:
THE Bottom Line: I think QTS warrants a hard look by investors who are interested in data center REITs or for those looking to diversify their REIT holdings across market capitalizations and sectors. One interesting trade could be to come out of DLR and into QTS for the growth (a partial swap is compelling). I believe that the equity will outperform the sector (with the possible exception of COR) as growth is factored in and the metrics rebalance themselves.
Again on April 15, 2015 I stated:
Bottom Line: While QTS is not cheap at these prices, there is still growth left in the shares. I believe it will continue to outperform its larger peers Digital Realty and DuPont Fabros. I do not, however, expect the REIT to aggressively raise its dividend as it has stated that the capital could be better used for growth.
The results speak for themselves since I published the name (holding period returns):
|REIT||TR since 7/23/14||TR since 4/15/15|
|Digital Realty (NYSE:DLR)||14.38%||6.84%|
|DuPont Fabros (NYSE:DFT)||13.55%||-6.34%|
The point of this you ask? Easy: Bigger isn't better and doesn't drive returns. I continue to expect QTS and COR to outperform.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.