Friday File: Real Money Portfolio Update

Buying an Industrial REIT and selling a Data Center REIT

By Travis Johnson, Stock Gumshoe, January 12, 2018

I’m not going to get as much of a start on the Annual Review as I hoped today, since I took some time to answer the urgent queries about Dr. Kent Moors’ latest LNG pitch and also posted some thoughts about Facebook this morning … but I do have a couple updates on the portfolio, and will be taking a look at every stock I own over the next few weeks.

And to add to the pile of commentary for your consideration, we’ve also got a new column from Dr. KSS for you today.

But for now, let’s check out what’s up with the Real Money Portfolio for this week…

First, a sell…

CoreSite (COR) has been weak of late, and I noted back in early December, when they announced a disappointing (to me) dividend increase that I would be tightening my stop on this position. I don’t usually pay close attention to technical trading metrics, but they can indicate market sentiment — which has clearly turned a bit, at least for now, as the stock just bounced below the 200-day moving average (around $108) and is more than 5% below the 50-day moving average for the first time all year. That’s enough for me to step in and protect my profits, given my skepticism about COR being able to replicate their growth of the past five years as we head into the future.

So I’ve sold roughly 2/3 of my COR position. I’m holding the rest because it’s still a good company, it’s still rationally valued at a 3.4% forward yield, and it still has some meaningful growth potential because of the strength of their core data centers, but I think the risk of the market revaluing the stock lower still is meaningful here, both because of macro trends and because I think their dividend growth will meaningfully decelerate from here (my working assumption is that rising interest rates will bring some meaningful corrections for REITs at some point this year, and COR’s dividend growth in the past few years has been juiced by increasing leverage and an increasing payout ratio, neither of which have a lot of room left to grow).

I may end up buying back in to a larger position if the stock drops to a better valuation, we’ll see. The risk on the upside, beyond anything exogenous like a takeover offer from ...

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