Old School Value Nugget Fest (July 25th Edition)

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On the Blog

A Closer Look Into REITs: STORE Capital

By Mark Roussin

Since we recently went over what REITs are at a high-level, I figured I would introduce to you a name I have been high on for quite a while. Also, might I mention, Warren Buffett has backed this REIT as well, so that is telling you something.

The REIT I will introduce to you today is STORE Capital (STOR). STORE Capital is a triple-net lease REIT that went public in November 2014.

When investors think of REITs within the Net-Lease sector, the two that most commonly come to mind are Realty Income (O) and National Retail Properties (NNN). Rightfully so, as they are the two largest and have dominated the sector for some time. Realty Income is a favorite stock for many income-minded investors, as they offer reliable, growing dividends with lower risk. STOR is often looked at as the little brother to O, but they pack a big punch and have been performing quite well over the years.

So, what is a net-lease REIT?

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What We’re Reading in the Media

Gurus

• Adding Your Two Cents May Cost a Lot Over the Long Term (Joel Greenblatt, PDF, Jan 2012)
  “Let’s put it another way: on average the people who “self-managed” their accounts took a winning system and used their judgment to unintentionally eliminate all the outperformance and then some!”
   
• Warren Buffett: How Investors Lose Millions – If [The Stock Price] Ever Gets Back There, I’ll Buy It! (The Acquirer’s Multiple)
  Quick nugget.

Market & Investing

• Why Boring Stocks Are Beautiful (And May Be Risky Today) | Intrinsic Investing
  “If we are moving back to an Old Normal (a “normalization” of inflation, higher rates, etc.) then boring stocks are MASSIVELY OVERVALUED; however, if we’re stuck in a New Normal (persistent low rates, low inflation, etc.), boring stocks, along with the rest of the market, may be fairly- to undervalued, albeit – and this is a key point/trade-off – with expected equity returns below long-term historical averages.”
   
• Rebalancing Luck (Spring Valley AM)
  It’s sensible thinking of basically controlling and changing what you can control and change. “We demonstrate that a strategy rebalanced on different dates using the exact same investment process can exhibit return differentials of over 20% across short periods of time.”
   
• The “optimal” portfolio is, at best, a moving target (A Wealth of Common Sense)
  “The hard part about running actual money in the markets is those periods of relative underperformance always feel longer than they actually are. Time slows down because you can’t help but check performance on a regular basis.”

Companies, Industry & Strategy

• How I Spotted A Fraud (Before It Was Too Late) (Forbes)
  “Be highly suspicious of companies that have free cash flow that is significantly below earnings for a long period of time. Unless the company is making verifiable investments likely to produce attractive returns, you are better off passing.”
   
• Apple in Advanced Talks to Buy Intel’s Smartphone-Modem Chip Business (WSJ)
  Apple is willing to let go of $1B for the patents.

Video of the Week

ACATIS Value Conference 2019, Dr. Hendrik Leber, ACATIS, “Brave New World”

Image of the Week

Timeline of financial crisis (H/t Sidecar)

Quote of the week

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki