Liz here, back to normal! (By “normal” I mean hiding from the oil man who is supposed to come out here today and fill up our oil heater tank. I keep peeking out from behind the curtains to see if he’s here yet – I’m simultaneously fascinated and repelled by the idea of somebody driving up my driveway with a hundreds of gallons tank of explosives.)
On the more sane side of normal, my PTON short is up 40% and climbing. I want you to go ahead and lock in double digits on this now – cash out half, and save the other half for later.
I love it when my recommendations make money. It’s like I have an excuse for existing. I should probably explore this in therapy.
Today we’re back in the saddle with a new REIT play from CJ (plus a serial killer chart, I love that man).
“REITs are high on the list, as we’re still seeing growth in the real estate market,” CJ says. (Indeed, we are! Sometimes I go on Redfin just to look at my house and see that it’s officially “Sold” and I bought it.)
CJ’s on a bit of a REIT roll right now – not to be confused with a Rick roll – with LXP stock up 2% and options up 8% since we recommended them last week.
And today he’s back in the sexy, underground world of real estate trusts with an even more glamorous play – a money-doubler on a data center REIT. (Spoiler alert, these are not at all glamorous but they do make a buttload of money.)
Have Your Cake…
Again, please don’t close out all of this. I’m really curious to see how high the second half of the play gets – but I do want you to make sure you lock in some gains today.
Action to Take:
SELL-to-CLOSE HALF of your PTON Dec. 17 $45.00 Puts (PTON211217P00045000).
At some point soon, we’ll have a working site where you can leave me comments! When that happens, I fully expect a report on exactly how much money you made and how grateful you are. (I don’t ask for much.)
…And Eat It Too
Thinking of Rick Astley, for some reason, reminds me of the Weird Al parody of Michael Jackson’s “Beat It.” “Eat it, just eat it!”
Today, obviously, it’s “REIT it, just REIT it!”
OK, I’ll shut up and let CJ talk for awhile.
“There’s a ‘money migration’ going on in the market that is favoring dividend-yielding investments,” CJ says. “Investors and traders are looking for yields as the bond market is seeing selling pressure. And utilities, dividend-yielding stocks, and REITs are seeing positive money flow as a result.”
According to the ever cheerful Goldman Sachs, “the current inflation surge will get worse this winter before it gets better.” (Here’s their graphic showing a massive hump.)
All that inflation just firms up the Fed’s tapering plans – and means that bond investors will be looking to dump their bonds and make money elsewhere…
This feeds into an interesting crossover conversation that I’ve been having with Tim Melvin for years. No matter what shenanigans happen in the stock or bond markets, people still have to shower and keep the lights on. That means that infrastructure and utilities will always be a safe bet – a kind of “gold standard” to run home to when TSLA does you wrong.
(By the way, we’re back tomorrow with a new Tim play! You guessed it, it’s a small bank. Just like his other four “set it and forget it” banks that have been slowly creeping up since we recommended them. Track them in our portfolio right here.)
Anyway, Internet infrastructure is a vital utility now, which means data center REITS feed nicely into the safe-haven craving. With a data center REIT like Digital Realty Trust, Inc. (NYSE: DLR), you can invest in a big basket of the buildings that house the physical Internet.
CJ says, “I’ve preached the fact that I like data center REITs given the fact that we’re not going to stop generating data and we’re seeing an increase in the need for these data centers.” In fact, data centers were the highest-performing REIT sector in 2020, and are expected to grow at a CAGR of 4.5% over the next 5 years.
If I were going for a really cheesy “sales letter” (we NEVER do this in our business, EVER), I’d start out with this ominous picture…
And add a teaser headline like… “There are 3 million of these mysterious buildings in the United States….”
But I would NEVER do that. I’ve certainly never done ANYTHING like that in my career.
CJ – one of my favorite Depth Traders – sees some good technical things going on for DLR right now, which is why he picked it out of the sea of 3 million mysterious buildings. Here’s his notes – and, of course, his serial killer chart.
- After earnings, DLR saw a quick rally that resulted in a consolidation at current prices. This is setting up for a breakout move that will be turbocharged by the demand for higher yields.
- Shares just finished a Silver Cross, indicating that bullish momentum is picking up.
- Shares are sitting just below their top Bollinger Band (like many of the REITs) which is a signal that we’re getting ready to see some positive volatility which will help drive higher prices on DLR.
CJ’s trades, as always, are pretty straightforward. He’s got a “Nickel Slots” where you just buy the stock. This is, admittedly, not the cheapest purchase in the world, but it still costs less than filling up your OIL TANK for the winter. (That guy still hasn’t gotten here.)
Here’s what to do:
Action to Take:
Buy Digital Realty Trust, Inc. (NYSE: DLR) shares using a limit of $163.
And here’s “Dollar Slots,” which is a middling expensive call. You do, however, have some time value built in, which is what you’re paying for. With any luck, you’ll make 100% on this before Tax Day. Instant tax return!
Action to Take:
Buy-to-open DLR April 14, 2022 $175 Calls using a limit price of $3.90.
Enter as a Good-til-Canceled (GTC) order.
I’ll be back tomorrow with a new Tim Melvin play, if all goes to plan and my oil tank has not exploded.