Cabot’s “The Next Amazon” stock

By Travis Johnson, Stock Gumshoe, January 11, 2016

The Cabot Stock of the Month newsletter from Timothy Lutts is one of those “best of” newsletters — its goal is to identify the best pick each month from among all of the newsletters published by Cabot.

Which sounds lovely, right? Why would you want anything but the best stock, why even consider subscribing to all the other newsletters from that publisher if you’re only getting ideas #2-10 for that given month?

Such is the world of investment promotions — investing is a world of uncertainty, probabilities, multivariate problems and surprise catalysts of both negative and positive sorts, but we all seem to desire certainty and binary outcomes. Winners and losers.

That obviously doesn’t work, there are probably not even that many folks among us who could accurately pick out the one stock in our portfolios that will perform best over the next month, let alone the next year — and those are the stocks you know best and follow frequently. We probably can’t even pick two or three of the top five performers in our portfolios in advance… at least not with any kind of consistency. If we could, we wouldn’t need to diversify.

So yes, every time you introduce a “pick this one stock out of the ten available for RIGHT NOW” selection, you’re increasing risk because there’s a new layer of opinion laid on top of the analysis of those ten stocks, which is kind of like a second layer of “manager risk.” I would bet that buying all ten Cabot picks, each month, probably does better than buying just the “top” Cabot Stock of the Month pick each month over the long term, though that’s just a guess.

But, naturally, I still want to know what Timothy Lutts’ “Next Amazon” pick is as his Stock of the Month for January… so what is it?

Here’s how he gets us interested in his free article today (you can see a version of it from last week on their website here):

“The Next Amazon

“I used to own Amazon once. Bought it in January 1998 (long before the company was profitable) and sold it in January 2000, for a profit of 1,290%. Those were the days!

“But I’d rather be hunting the next Amazon now.

“It’s much more fun, and my criteria are pretty simple:

“Fast growth of revenues.

“A great growth story that can persist for years.

“A stock that’s outperforming the market, ideally by regularly hitting new highs….”

And then he throws down a few hints that we can toss into the Thinkolator…

“This company grew its revenues roughly 80% last year (final numbers aren’t in yet), to roughly $130 million, and it could continue that growth for years to come.

“Most investors don’t know the stock; it only came public last April.

“But it was hitting new highs last week, even while the broad market was falling to pieces, as investors in the know were accumulating it!”

A little bit thin, right? There were only 15 IPOs in April, but that’s still a fairly squishy bit of clueishness — thankfully, Lutts cut down on our work level a bit by including a chart (he loves him some charts), so we can confirm that, yes, the stock they’re picking this month (presumably he means this month, maybe it’s the pick from December — they didn’t specify) is…

National Storage Affiliates Trust (NSA)

Which is a great ticker symbol for what is, at its heart, a very simple company: They own self-storage properties and rent them out, so that none of us ever have to sell Aunt Petunia’s old breakfront that will never fit in any home we ever inhabit, or recycle our college notebooks from 1989, or sell that motorcycle that you know you’ll never ride again. We’ve been becoming a nation of hoarders, of downsizers, of renters to some degree, and all of those trends help to support the self-storage industry.

Which has also been one of the hotter little micro-segments in the market for several years — there are five publicly traded self-storage REITs, and all have been fantastic investments over the past five years, the weakest among them has provided almost three times the return of the average REIT. They are CubeSmart (CUBE), Sovran Self Storage (SSS), Public Storage (PSA) and Extra Space (EXR). National Storage is far, far smaller than all of the established public storage companies — PSA is the granddaddy of the business and is massive with a market cap of $44 billion, but the others are also all multibillion-dollar companies — NSA has a market cap of about $400 million and is clearly the upstart trying to grow into a competitive position. This is how they’ve done so far this year (so yes, you can see that they mostly trade together and react to the same economic or market catalysts, though over longer periods PSA emerges as a dramatically better performer to date):