Greetings from the NCH emergency room in sunny Bonita Springs. I’m doing my best to keep my sense of humor. Unfortunately, however, my back ultimately gave out after my recent trip, and now I’m sitting in a bed waiting for the doctor to return. So that’s my gift to you as you follow me on this road to recovery.
I’ve spent the last two days watching Penn National Gaming rally and have now turned my attention to other companies that I expect will do exceptionally well to start 2022. Here’s my latest top idea.
Keep It Industrial
The real estate market remains a very good hedge against the ongoing threat of inflation. But we want to add on another trend to seek the strongest gains possible. That other trend is the global supply chain disruption that will continue well into next year.
While the government aims to address the backlog of containers by running our West Coast ports 24/7, there’s a major issue that we must address. The last time union longshoremen’s representatives got together over their labor contracts was seven years ago. In 2014, West Coast ports faced massive slowdowns. Their contract is up for renegotiation this year. The official expiration of the current agreement is July 1.
Here’s the thing, given the incredible challenges that our ports face, the labor movement has far more leverage this time. When companies are raking in record profits, these employees are going to demand a big raise.
That means that both sides could start the year off very far in their expectations of one another and a new agreement. And if we do have a strike, we’re going to see inflationary pressures compound. No one seems to be discussing this challenge. And in America, we love to bring every single deal down to the wire. So I’m quite worried about this.
How to Play
The inflation play here is in industrial real estate. More companies are manufacturing here in the U.S., and we need more warehousing space to accommodate. Stag Industrial (NYSE:STAG) owns 517 properties in 40 states. We’re talking about 103.4 million square feet of manufacturing and warehouse space.
What’s refreshing about this real estate investment trust (REIT) is that they operate one of the biggest triple-net leasing portfolios. Under these agreements, the tenants pay all the expenses linked to the property. That includes real estate taxes, insurance, maintenance, and more on top of the rent.
These agreements are very good for shareholders because they provide strong sources of rental income, less risk, and greater stability. Stag currently pays a dividend of 3.23%. I foresee a hike coming as the stock continues to charge higher. My price target for Stag Industrial is $52.