Go-go tech stocks have captured trillions of dollars of investor attention for years, and for good reason. But that doesn’t mean the top proprietors in the humble warehouse and storage-bin business have to always take a back seat.
Indeed, comparing the performance of the two largest real estate investment trusts (REITs) in the logistics and self-storage space, respectively, with two of the FAANGs makes you wonder whether those humble real estate investments have the real teeth here.
The FAANGs are the big five of technology stocks: Meta Platforms, Amazon, Apple, Netflix, and Alphabet.
The two REITs we’re looking at here are Prologis (NYSE: PLD) and Public Storage (NYSE: PSA). With nearly a billion square feet under the roof, the former is the largest owner of logistics warehouse space on the planet; while the latter, with nearly 2,500 branded facilities in the U.S., lays claim to being the world’s largest owner, operator, and developer of self-storage facilities.
Year-to-date and 3-year records show their resilience
Nothing flashy about these businesses, except perhaps their performance, which compares favorably to the tech sector in general but especially to two of the FAANG gang. Netflix and Meta Platforms are faring particularly poorly now and face stiff tests of their own market resilience as they try to reposition their prospects and products going forward.
As the chart below shows, Public Storage and Prologis have not only not bled red in total return so far in this year of inflation and beaten-down stock markets, but are also handily outpacing Netflix, Meta Platforms, and the benchmark NASDAQ-100 Technology Sector Index. Plus, they pay dividends. Public Storage is currently yielding about 2.04%, while Prologis is at about 1.88%.
And this resilience in tough markets is not necessarily a short-term thing. Check out the three-year returns in the chart below. Both these REITs again outperform the much bigger names and the tech sector index.
Staying power that doesn’t demand daily attention
Prologis and Public Storage have proven their staying — and paying — power. Now we’ll see what’s next. Their prospects appear good.
Prologis maintains its own Prologis Rent Index, which recorded record rent growth industry-wide of 15.6% in 2021, as well intense demand going forward that should bolster further revenue growth for the warehouse giant and its competition. Public Storage, meanwhile, bought 232 facilities and developed six more of its own in 2021 and is projecting 12% to 15% revenue growth this year alone.
Both these businesses rely on long-term leases, not the whims of consumers. While both have competition, their solid positions in inflation-resistant sectors should allow these resilient REITs to continue providing nice returns to their shareholders for years to come.
Further adding to their appeal, investors may not feel the need to watch every announcement, every earnings estimate, every analyst’s upgrade or downgrade. Just check in occasionally along the way while you enjoy the flow of passive income they provide.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Marc Rapport has positions in Amazon. The Motley Fool has positions in and recommends Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., Netflix, and Prologis. The Motley Fool recommends Alphabet (A shares) and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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