Stock (Symbol) |
Public Storage (PSA) |
Stock Price |
$206 |
Sector |
| REIT |
Data is as of |
| January 2, 2018 |
Expected to Report |
| Feb 20 |
Company Description |
 Public Storage is a real estate investment trust (REIT). The Company’s principal business activities include the ownership and operation of self-storage facilities, which offer storage spaces for lease, generally on a month-to-month basis, for personal and business use, ancillary activities, such as merchandise sales and tenant reinsurance to the tenants at its self-storage facilities, as well as the acquisition and development of additional self-storage space. The Company’s segments include Self-Storage Operations, Ancillary Operations, Investment in PS Business Parks, Inc. (PSB) and Investment in Shurgard Europe. Source: Thomson Financial. |
Sharek’s Take |
 Public Storage (PSA) is on the decline as higher interest rates are hurting REITs. And with the President’s new tax plan taking effect, the economy is expected to grow at a rapid rate in 2018, which could mean higher inflation and thus interest rates. Public Storage owns and operates more than 2600 self-storage facilities in the US and Europe (UK, Sweden, France, Germany, Belgum and the Netherlands). As of December 31, 2016 the company had 2348 Public Storage locations, 219 European locations (named Shurgard) and 99 PS Business Parks, which serve the business community. Units are air conditioned and sizes are 5′ x 5′, 5′ x 10′, 5′ x 15′, 10′ x 10′, 10′ x 15′, 10′ x 20′ and 10′ x 25’or more. Last year the company achieved a record 95% occupancy rate. PSA is a Real estate investment trust (REIT) and pays a majority of its profits as dividends. The stock is a good one — with a high safety rating plus a 4% yield. The company pays a nice $2 dividend to its investors each qtr. PSA went public in March 1998 and through 2016 delivered a total return to shareholders of 942% or 13% a year. During the past ten years the stock’s grown at 10% a year — also delivering a 13% a year total return — but management expects growth to moderate over the next few years as its U.S. self-storage growth rate declines. Still, the company can make acquisitions to boost growth. I added Public Storage to the Conservative Growth Portfolio last qtr, but now I feel I was a qtr early as the stock is down a bit. But with a healthy yield of 4% and an experienced management team looking for more REITs to buy, this stock looks good as a long-term investment. |
One Year Chart |
 Last qtr Public Storage had a 2% rise in revenue as FFO rise 4%. Looking ahead, FFO is expected to be -1%, 6%, 13% and 2% the next 4 qtrs. The Est. LTG just rose from 11% to 17%, which I feel is a bit far fetched. The P/E shown here isn’t really on earnings, its on funds from operations, thus the stock sells for 19x FFO, down from 20x FFO last qtr. |
Fair Value |
 The valuation of PSA was high in 2015-2016 as interest rates were low. Now that rates have increased a little, the valuation has come down. My Fair Value is 22x FFO, which is $233 a share. But with the stock down below $200, I feel that may be too optimistic at this point. My valuation on this stock may have to come down some if we see continued increases in interest rates. |
Bottom Line |
 Public Storage has had a nice decade, but a lot of the success was due to rates being low, which made REITs more attractive. Now with rates on the rise, the stock is on the decline. The question is when will this stock become a value? I feel it’s a good value now, but the trend is your friend and the trend is down with this stock. PSA comes down in my Conservative Growth Portfolio Power Rankings from 19th to 30th. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 30 of 32 |
