San Diego Housing Market News and Analysis
Data Center REITs
User Forum Topic
Submitted by gzz on June 30, 2022 - 8:02am
I finally found another RE sector to short. Most of RE seems fairly valued or more often very undervalued. But not these data center REITs. I started with EQIX and DLR.
The long thesis for these stocks I guess is Cloud Computing Boom! AWS!
They seem however to have anemic sub-inflation growth while costs are rising faster than inflation. That would be fine if they were cheap or super-profitable, but they aren’t, they have 70-100ish P/Es and negative earnings growth.
The reason these stocks are overvalued is that for a while they did show healthy growth. That seems to be over now, even before the big tech slowdown which could look very ugly for them.
They also are talking about how excited they are to enter the market in Argentina and Chile. Good for them if that works, but American companies with lots of good US/Canada opportunities don’t generally go for big RE investments that far away.
I have also half exited my short of WE. It is still overvalued, but the borrow interest spiked to 11% and it already has dropped in half. It has a tendency to have big irrational rallies so covering under 5 now seems prudent.
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