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August “Idea of the Month”

Finally taking a nibble of a little spinoff

By Travis Johnson, Stock Gumshoe, August 26, 2016

Before I begin talking about this month’s stock idea, a brief update: I added a little bit to my Coresite (COR) holdings late yesterday. I’ve been hoping for lower prices down to the low $70s, but at $78 I can at least make a more rational argument for the stock than I could when it was in the $90s. I did not rebuild my entire position, but I bought back about a third of what I had previously held… and I’m ready to buy more if the prices drifts downward more — or, fingers crossed, if Fed Chair Janet Yellen freaks everyone out with her speech today and REITs all fall by 10%. Please?

So that’s back to a meaningful position for me, though I was never completely out of the shares (for those who are new to my ramblings, I had sold covered calls against most of my position after holding it for years, and they were opportunistically called away at the last dividend date). I expect them to again raise the dividend this year, and if they raise it by at least 15% (as they have each year going back to their IPO), then buying it at $78 would give you a forward yield of a bit over 3%.

That’s still not great, but for this kind of dividend growth in a strong market, where they’re still focused on growth (including a new buildout at their Reston, VA campus that they announced recently) and still have room to grow some in their existing facilities, with seemingly no end to demand for powered and well-connected data center space and services, I have to grudgingly admit that I’m willing to pay $78 a share. It still looks better, to me, than all their data center REIT competitors (EQIX, DLR, DFT and QTS are the ones that I typically watch).

And now, on to our new idea…

This month I’m looking at a stock that I first mentioned to you about a year ago — it finally got to the point where the numbers are getting “seasoned” a little bit, they’re close to having a year under their belt as a public company and getting reasonable data into the various market feeds and screeners, and, thanks primarily to one really weak part of the business (energy, primarily, though it manifests in railroads as well), the stock has ...

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