Where to “store” your money now
Today's Financial News - Posted June 4, 2009
The recession is changing the way many companies do business. As they slash headcounts, close factories and walk out of warehouses, the self-storage industry is booming.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Businesses across the globe are in conservation mode. While layoffs and headcount reductions are the headline makers, savvy managers are doing much more to protect their bottom line, from cutting inventories to slashing office space.
As firms off all sizes work to boost their fundamentals and prop up their books, many smaller companies are taking a unique approach. They are utilizing the cost-saving advantage of self-storage.
Companies like Sovran Self Storage (NYSE:SSS), Public Storage (NYSE:PSA) and Extra Space Storage (NYSE:EXR) are reporting an increase in revenues thanks to the recession’s nasty impact on small businesses.
Instead of risking their business by expanding too quickly, many companies are making timid advances and renting on a month-by-month basis. Foreclosures, bankruptcies and downsizings are good news to an industry that promises to safeguard your assets until the economy rebounds.
The trend is adding more pain to the already horrific commercial real estate industry, but is creating a great opportunity for savvy investors. The self-storage industry offers a rare shot at revenue growth even in the teeth of one of the nation’s fiercest slowdowns.
Their pain, your gain
Out of the three companies mentioned above, the one worth taking the closest look at is Extra Space Storage. With a market value of about $710 million, it is larger than Sovran by about $200 million, but drastically smaller than Public Storage and its $11.3 billion market value.
One of the most appealing aspects of the company is its exposure to some of the nation’s weaker real estate markets. As the value of its properties rebounds, its shares price will follow.
Don’t forget, as a REIT the company must give back 90% of its income to shareholders. The company’s current dividend stands at 12% of its $8.34 share price.
As the markets begin to level off after a big plunge and the ensuing correction, fundamentals will be key. Not only does the self-storage industry have a strong business model, with growing revenues, its books will only get healthier as the nation’s economy rebounds.
The industry helps to prove there is always a silver lining in even the darkest of storm clouds. All of those bankrupt businesses and foreclosed homeowners have to put their junk somewhere.
Might as well let them put some profits in your pockets.
Next Article: Small-cap disaster of the day: Odyssey Marine
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