Digital Realty Trust (DLR)

Global data center REIT. AI buildout is the growth narrative. Recurring revenue comes from renting long-term leases, but many companies are building their own data centres. Neocloud companies have added improvements and efficiencies. This name is more like a landlord, so less volatile.

An OK compounder, but better ways to play.

One of the largest data centre REITs. Great company, growing nicely. Trades at discount to intrinsic value. Sweet spot in the cycle. AI is a further tailwind to all of this. 

Data centre expansion will be massive over next 5 years. Biggest hindrance right now is land availability and power transmission, and this company has both.

AI is going to affect every job on the planet, so it will have to touch real estate in some manner. AI can help decrease operating costs in operationally intensive areas. 

Data centre space is really exciting in this regard. Supplying power to data centres is the issue here. Those companies that have a great pipeline will do well.

Loves it. A more conservative play, not as volatile, since it pays out royalties as a REIT. 12-month price target of $185. If you don't like the REIT business model, then you should buy EQIX as a pure play.

The stock got overheated during the data centre rally. Wait for it to come back down. This could go much lower after going parabolic.

They reported great bookings. To play AI, invest in data centres. 

Second-largest data centre REIT globally. Record industry leasing last quarter, 4 times as much as a year ago. Tenants are big tech, with lots of capital to put into data centres to support cloud rollout. Coming AI boom, will benefit. Pricing power. Over 5% internal growth annually, could be higher. Modest premium to NAV, and the NAV will increase over the years. Yield is 3.4%.

One of two pure plays on data centres. Beat on top and bottom raised guidance. 12-month price target of $162.50. Yield is 3.4%.

Owns most of its data centres, whereas EQIX has arrangements with customers. As well, EQIX stock went through the "death cross", which is usually not good. 

DLR is a fundamentally strong REIT, with expanding net profit margins and ROE, and it generates good free cash flows. Its yield is attractive, although its Funds From Operations (FFO) to debt have been declining over the past few years, indicating its debt levels have increased at a faster rate than FFO. It trades at a high valuation, but this can be justified given its strong fundamentals. Given a potential peak in interest rates, the underlying secular trend growth in the data center industry, and its strong fundamentals, we would be comfortable holding or adding slowly to this name.
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Buy in tranches with each increase of 0.25% in interest rates. Likes DLR.

The chart shows a nice uptrend since late May, and coming after a 2-year downtrend before peaking at $180. It's a recovery story. Is there enough interest for this to break above $120 to $140? Watch weekly closes, rather than daily closes, because there are five data points in a week.