Self-storage companies got a boost in Monday trading as Raymond James upgraded the sector, saying that a shakeout in the broader real estate investment trust market is providing an opportunity to invest on the cheap.
Fundamentals for the self-storage sector are solid, especially given limited new supply, according to analysts RJ Milligan and Paul Puryear.
Raymond James upgraded CubeSmart and Extra Space Storage Inc. to "Strong Buy" from "Outperform". They said CubeSmart has a strong growth profile, with the ability to grow faster than its peers. They also said that a recent drop in price of Extra Space shares provides a good entry point for investors to buy into the company, which they see as having a marketing and technological advantage over its peers.
Milligan and Puryear also upgraded a larger competitor, Public Storage, to "Outperform" from "Market Perform". They said that while the company's growth profile is not as attractive as its smaller peers, it has low expense growth and the ability to increase rates better than its peers.
Raymond James upgraded the sector as a whole to "overweight," from "market weight."
Shares of CubeSmart increased more than 2 percent to $16.56 by midmorning. Its shares are at the higher end of their 52-week trading range of $10.89 to $17.70. Extra Space shares increased 66 cents to $42.97, edging just ahead of broader market gains. Its stock is also at the upper-end of its 52-week trading range of $28.61 to $45.29.
Shares of Public Storage increased $1.13 to $152.93, just below the level of increase seen in the overall market.