While few growth stocks are showing buy opportunities in this market, today's IBD 50 Stocks To Watch pick is an exception. Shares of Public Storage, a low-volatility storage play, is trading just above a buy point at the 10-week moving average.
Storage stocks had a powerful run near the end of last year as several leaders scored breakouts from buy points. As the stock market indexes shifted to a downtrend near the end of the year, REITs were among the top groups producing buy opportunities.
Public Storage scored a breakout on Oct. 22 and has been slowly climbing higher since. Shares moved above a 327.14 cup-with-handle entry, according to MarketSmith, before drifting sideways for a few weeks.
Although this growth stock is a slow mover, relatively speaking, shares did not lose momentum after the breakout and held above the 21-day line until about a week ago. The relative strength line shows positive action in recent weeks as it inches toward highs.
Shares tested support at the 50-day line Friday and bounced over 4%, closing near the highs. Currently, the stock is trading right at the 10-week line, an optimal place for initiating a position. The 10-week line remains a viable point of entry, as long as shares are less than 10% above the moving average. Beyond that, the stock would be considered extended.
Investors should be mindful of the general market conditions, which are in correction. This indicates it's best to be conservative with any new buys at this time since the market is trending against you.
Growth Stocks To Watch: Public Storage
Public Storage is a REIT focused on acquiring and developing self-storage facilities and leasing units to renters. The firm managed to grow revenue and funds from operations at an accelerated pace in the two most recent quarters. Year-over-year FFO growth came in at 28% and 30%, respectively. This was up from growth of 3% and 9%, respectively, in the quarters prior.
For REITs, funds from operations, or FFO, is similar to a company's earnings per share. Public Storage's sales rose 16% and 22%, respectively, in the two most recent quarters.
According to a company update released earlier this month, the Glendale-based storage operator owns over 2,700 properties and roughly 198 million rentable square feet. The firm expanded its portfolio by over 35 million square feet since 2019. This far outpaces its competitors such as National Storage, CubeSmart or LifeStorage.
With established operations in 39 states, the growth stock generates above-average rents per square foot, compared to its peers, according to a recent investor day presentation. Public Storage's rents were around 15% higher than its peers. Additionally, the REIT is able to generate around 25% higher net operating income per square foot compared to its competitors.
Public Storage highlighted how a digital transformation has enhanced overall customer experience and fueled a margin expansion in same-store net operating income. The company also noted payroll cost savings of 25% thanks to its technology investments for the nine months ending Sept. 30, as compared with the same period in 2019.
