In this piece, we will take a look at the best warehouse and self-storage stocks to buy. If you want to skip our analysis of the warehousing industry, then head on over to 5 Best Warehouse and Self-Storage Stocks To Buy.
Some sectors are related closely to economic growth, and one such sector is the warehousing industry which serves the needs of manufacturing and logistics companies. Warehouses play a crucial role in these firms' operations. For the manufacturing segment, they can either store raw materials or finished goods before shipment, and for retailers, particularly large firms such as Amazon.com, Inc. (NASDAQ:AMZN), they are the backbone of operations since a warehouse has to be strategically located to ensure that it is placed close to customers and to shipping hubs.
Along with being an integral part of corporate operations, warehouses also serve the regular consumer. This is primarily in the form of self-storage units, that allow people to store their prized possessions or other belongings safely and securely. Broadly, warehousing and self-storage facilities are part of the industrial sub segment of the real estate market. Depending on the nature of the operator, these facilities can also be operated by entities called Real Estate Investment Trusts (REITs) which are specialized firms required to pay out most of their profits as dividends in order to maintain a tax exempt status. For more details on REITs, you should check out 15 Worst Performing REITs in 2023.
While on the surface a warehouse might appear to be as glamorous as some other facilities, the sector is one of many that has seen its operations become revitalized due to technology. As part of its functioning, a standard warehouse has several operations. These start from receiving products, storing them, then picking them, packing them, and shipping them as per demand requirements. And in each of these stages of operations, technology has started to play its role. Warehouse personnel have come to rely extensively on robots these days to aid them in picking or sorting goods. Additionally, a warehouse's floor layout is also optimized depending on the nature of its products and the product flow. For consumer oriented warehouses, such as those operated by Walmart Inc. (NYSE:WMT), the flow of products from entry to exit is different than say for industrial warehouses that hold raw materials or finished goods for industrial companies.
The warehousing sector is quite important these days when we consider the turmoil that has roiled the real estate sector. This imbalance and slowdown in the industry has been primarily due to the Federal Reserve's aggressive interest rate hikes since not only do builders require easy access to cheap capital for building large projects, but property management companies also need to secure long term credit for mega projects. A high interest rate increases the short term borrowing costs for construction firms, and it impacts the management firms too since writers of long term credits might be unwilling to issue new instruments until they have a clear picture of long term interest rates. The high rate environment coupled with the changed dynamics industry has hit the office real estate segment particularly hard and already caused some debt defaults by large companies.
The office real state space is facing difficulties in reversing the losses it has faced since the outbreak of the coronavirus pandemic and the subsequent impact that work at home trends had on office occupancy. As an illustration of this turmoil, consider the fact that delinquencies in the office sector touched 5% in July 2023 as they more than doubled over the year-ago figures. However, considering the delinquency rates only the industrial real estate segment is performing relatively well despite a high interest rate environment since its delinquency rate is the lowest in the industry and actually dropped in July.
However, the broader industrial and manufacturing sector paints a different picture. This segment is crucial to the health of the warehousing industry since higher output naturally increases the demand for warehousing. Data from the Institute For Supply Management (ISM) shows that July marked the 9th consecutive month of a decline in the manufacturing sector in America. At the same time, producer inflation is also going up, which is fueling worries that the Federal Reserve's fight against inflation might not be over since higher producer prices have the potential to translate into higher prices for the consumer down the road.
With these details in mind, let's take a look at the best warehousing and self-storage stocks to buy based on hedge fund interest. Some top warehousing and self-storage stock picks in this list are Prologis, Inc. (NYSE:PLD), BJ's Wholesale Club Holdings, Inc. (NYSE:BJ), and WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC).
10 Best Warehouse and Self Storage Stocks To Buy
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Our Methodology
To compile our list of the best warehousing and self-storage stocks to buy, we first compiled a list of roughly 40 companies that have a direct or indirect presence in the sector. Then, the number of hedge funds that had bought their shares or held a stake in them during this year's first quarter was determined through Insider Monkey's database of 943 hedge funds. The firms were then ranked according to hedge fund sentiment, and the top ten warehousing and self-storage stocks to buy are as follows.
First Industrial Realty Trust, Inc. (NYSE:FR) is an industrial real estate firm with close to 70 million square feet of property in its portfolio. The firm primarily manages distribution centers and has a wide clientele which includes multinational firms. First Industrial Realty Trust, Inc. (NYSE:FR) bucked the trend in Q2 2023 as its EPS beat analyst estimates.
22 of the 943 hedge funds part of Insider Monkey's Q1 2023 survey had held a stake in First Industrial Realty Trust, Inc. (NYSE:FR). Dmitry Balyasny's Balyasny Asset Management is the company's largest shareholder due to a stake worth $101 million.
Just like BJ's Wholesale Club Holdings, Inc. (NYSE:BJ), Prologis, Inc. (NYSE:PLD), and WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), First Industrial Realty Trust, Inc. (NYSE:FR) is a warehouse and self-storage stock seeing hedge fund attention.
Extra Space Storage Inc. (NYSE:EXR) is an industrial REIT with more than 3,500 self-storage locations all over America. Its second quarter results were disappointing as the firm reported a 13.3% decrease in its net income and a 3.3% decrease in funds from operations.
Insider Monkey took a look at 943 hedge fund holdings for their March quarter of 2023 investments and determined that 23 had owned the firm's shares. Extra Space Storage Inc. (NYSE:EXR)'s biggest hedge fund investor is Eduardo Abush's Waterfront Capital Partners courtesy of a stake worth $70.5 million.
Americold Realty Trust, Inc. (NYSE:COLD) is an industrial real estate trust headquartered in Atlanta, Georgia. As its stock ticker suggests, the firm operates temperature controlled warehouses and has more than a billion square feet of storage space in its portfolio.
24 of the 943 hedge funds part of Insider Monkey's Q1 2023 database had bought Americold Realty Trust, Inc. (NYSE:COLD)'s shares. Out of these, the firm's largest hedge fund investor is Scott W. Clark's Darlington Partners Capital since it owns 4.3 million shares that are worth $122 million.
The Chefs' Warehouse, Inc. (NASDAQ:CHEF) is a warehousing company that stores and distributes tens of thousands of different food products to restaurants, hotels, bakeries, and other establishments. Despite the fact that it missed Q2 2023 analyst EPS estimates by a wide margin, the stock is rated Strong Buy on average.
By the end of this year's first quarter, 24 of the 943 hedge funds surveyed by Insider Monkey had held a stake in the company. The Chefs' Warehouse, Inc. (NASDAQ:CHEF)'s biggest hedge fund shareholder is Joe Milano's Greenhouse Funds courtesy of a $74 million stake.
U-Haul Holding Company (NYSE:UHAL) is an American firm that provides logistics and storage facilities to people who are shifting between homes. While its overall net earnings dropped during the latest fiscal quarter, the self-storage business reported a $25.8 million growth.
Insider Monkey dug through 943 hedge funds for their first quarter of 2023 investments and discovered that 28 had invested in U-Haul Holding Company (NYSE:UHAL). Donald Yacktman's Yacktman Asset Management is the largest investor among these since it owns $352 million worth of shares.
Prologis, Inc. (NYSE:PLD), U-Haul Holding Company (NYSE:UHAL), BJ's Wholesale Club Holdings, Inc. (NYSE:BJ), and WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) are some great self-storage stocks to buy based on hedge fund sentiment.
