Weekend Links: What we Read, Listened to, and Watched

Guide to personal productivity, the history of Marriott ($MAR), and the California burrito.

👋Hello. Every Saturday morning we’re going to send our favorite listens, reads, and watches. Have recommendations? Feel free to shoot me an email at thecorner@tradesam.com or DM me on Twitter @jcd5816.

Have a great weekend!


WHAT WE READ

PMARCA Guide to Personal Productivity

I’ve tried many productivity hacks throughout the years; none have seemed to stick. Marc Andreessen, the co-founder of Netscape and partner at Andreessen Horowitz, wrote this back in 2007.

His formula:

  • Don’t keep a schedule.

  • Work on whatever is most important or most interesting at the time.

  • Keep three lists: Todo list, a watch list, and a later list.

Read the whole article

Three Big Things: The Most Important Forces Shaping the World

Another must-read by Morgan Housel. If you read one thing this weekend, read this!

From the article:

Every current event – big or small – has parents, grandparents, great grandparents, siblings, and cousins. Ignoring that family tree can muddy your understanding of events, giving a false impression of why things happened, how long they might last, and under what circumstances they might happen again. Viewing events in isolation, without an appreciation for their long roots, helps explain everything from why forecasting is hard to why politics is nasty.

Read now!

Never Split the Difference: Negotiating as if Your Life Depended on it

I’m about half-way through this book, and I love it! Learning how to persuade, influence, and negotiate are life skills I’ve underinvested in. No more🤨 (h/t subscriber Marc for the recommendation)

Buy it on Amazon


WHAT WE LISTENED TO

Bizogrpahy: The History of Marriott

Willard Marriott Sr. got his start in business at age 14 when his father entrusted him to sell their family’s 3,000 sheep; sending him alone to San Francisco to complete the transaction.

His first real business was an A&W rootbeer franchise he bought in 1927. After that, he expanded into restaurants and didn’t open his first hotel until 1957.

Today, Marriott ($MAR) is the third-largest hotel chain in the world with a market cap of $40 billion.

Listen to their story

The Rewatchables: Remember the Titans

One of my favorite podcasts. The Ringer crew does a deep dive on the 2000 hit movie about a high school football team during the early days of integration.

Listen now


WHAT WE WATCHED

What is it about watching other people cook food? This is on the top of my list for a weekend cook.


GIPHY TO GO

Have a great weekend😎

Caleb

🔥New Format (Podcast First); American Tower ($AMT); iShares Cohen Steers ($ICF)

  
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American Tower ($AMT) ◾ Wireless infrastructure REIT ◾ $98 billion market ◾ 1.99% div yield

Brief:

American Tower has crushed the S&P 500 by 445% over the past 10 years.

What they do:

They own, operate, and develop communications real estate like cell towers. Their customers include wireless service providers (AT&T, Verizon), radio and television companies, and government agencies.

How they make money:

Their revenue is generated from tenents leasing space on their towers.

High gross margins and low CAPEX: The marginal cost of adding new tenents is low (see picture below). This has resulted in gross margins averaging 70% for the past five years. Which rivals gross margins at some software companies.

In addition, sites require little to no annual CAPEX.

Churn: Historically, churn has averaged 1 to 2% per year.

Revenue is diversified globally: 51% U.S., 2% Asia, 9% EMEA (Europe, Middle East, & Africa), 17% Latin America.

Why we like this company:

This company allows you to participate in the “software is eating the world” trend without having to pick who the next wave of winners will be (i.e. who will be the next Facebook, Amazon, etc).

Financial highlights for FY 18’ 17’ & 16’ ($ in millions):

  • Revenue: $7,440.1; 6,663.9; 5,785.7

  • Revenue growth YoY: 11.6%; 15.2; 21.3

  • Gross margin: 70.7%; 69.1; 69.1

  • Net income margin: 16.6%; 18.6; 16.5

  • Free cash flow: $3,748.3; 2,925.6; 2,701.7

  • Return on equity: 17.0%; 15.3; 13.1

What’s their chart telling us?

The trend is higher. At these prices, we do not believe the risk/reward favors new positions. We would wait for a BIG DIP.

ETFs that include American Tower:

Pacer Data & Infrastructure Real Estate ($SRVR); Real Estate Select Sector SPDR ($XLRE); iShares Cohen & Steers REIT ($ICF) (See below).

Additional resources:

Investor presentations: Introduction to the tower industry; American Tower overview; U.S. Technology and 5G update. (All three presentations offer great information)

iShares Cohen Steers ($ICF) ◾ REIT ◾ $2.4 billion market cap ◾ 2.86% dividend yield

Since bottoming in 2009 at $23, this REIT has gained over 420%; outpacing the S&P 500 by ~70%.

This REIT is interesting... They don’t focus on a specific sector; they own REITs that dominate their respective categories.

Sector breakdown:

  • Specialized (data center & cell tower REITs): 28.52%

  • Residential: 19.35%

  • Retail: 15.79%

  • Office: 12.66%

  • Industrial: 10.24%

  • Healthcare: 9.71%

  • Hotel & Resort: 3.31%

Additional resources:

ETF home; Fact sheet; Prospectus.


Thanks for reading, and have a great day!

Caleb


Nothing in this post/podcast is to serve as investment advice. It’s for informational purposes only. Always do your own research🤨

💥Data Center REITs; 5G Technology; Esports

4.5 min read. Equinix ($EQIX); CoreSite Realty ($COR); CyrusOne ($CONE); Nordstrom ($JWN); Esports ($NERD).

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Today’s Newsletter:

  • Data center REITs. 5G explained.

  • Is Nordstrom ($JWN) a buy?

  • The $NERD ETF.


DATA CENTER REITs

Last week, we mentioned that Colony Capital ($CLNY) is selling 90% of its holdings in traditional real estate assets like hotels and warehouses and is pivoting to data centers, cell towers, and fiber optic networks.

Here are a few REITs/companies we will be watching in this space.

But first, a little context…

A market poised for growth📈

Data centers are the backbone of the internet. They store, communicate, and transport the information we produce every day. The more data we create, the more vital our data centers become, per CB Insights.

Read CB Insights full report on the future of data centers.

👋Hello outperformance

Data center REITs have crushed the S&P 500 over a ten-year period.

  • CoreSite Realty ($COR): +774% outperformance

  • Equinix ($EQIX): +464%

  • CyrusOne ($CONE): +181%

🔥We like this sector for two reasons🔥

  1. The weight of evidence suggests data centers will continue to grow for the next few decades; relative to other real estate sectors.

  2. Their charts are in uptrends.

Which means — Buy the dips! Assuming your time frame is 5-10 years+.

Also: In our view, the risk/reward does not favor new positions at these levels. Even though we like all three REITs long-term, we would wait for a dip before putting on new positions😉

Equinix ($EQIX) ◾ Data centers ◾ $49 billion market cap ◾ Dividend yield: 2.59%

What’s their chart telling us?

The trend is higher. We would look for demand first at $360, then $320 (blue arrows).

Additional resources:

Company homepage; Q2 2019 earnings presentation; 2018 annual report and 10-K. The future of data centers (HIGHLY RECOMMENDED); Financial statements and valuation metrics.

CoreSite Realty ($COR) ◾ Data Centers ◾ $4.5 billion market cap ◾ Dividend yield: 4.75%

The trend is higher. We would look for demand first at $90, then $70 (blue arrows).

Additional resources:

Company homepage; Q2 financial highlights; Q2 investor presentation; 2018 10-K.

CyrusOne ($CONE) ◾ Data centers ◾ $8.95 billion market cap ◾ Dividend yield: 3.48%

The trend is higher. We would look for demand first at $65. And if that level breaks, we will take another look.

Additional resources:

Company homepage; Q2 2019 earnings presentation; 2018 10-K.


5G TECHNOLOGY

As our digital life continues to expand, cell networks are getting crowded. This has resulted in poor reception, dropped calls, and longer download times for media like music and video👇

Source: American Tower ($AMT) investor presentation

When at scale, the jump to 5G will be jarring (in a good way)

Source: American Tower ($AMT) investor presentation

For a complete view of 5G’s potential, watch the video below

American Tower ($AMT) ◾ Wireless infrastructure (cell towers) ◾ $98 billion market cap

American Tower was spun from CBS/Viacom in 1998. Since then, it has built a dominant position in wireless infrastructure. And is in prime position to capture value when 5G technology is deployed.

We’ll dive deeper into American Tower in our next issue. Subscribe below to get it delivered to your inbox.

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COMPANIES TO WATCH

Nordstrom ($JWN) ◾ Department store ◾ $5.22 billion market cap ◾ Dividend yield: 4.42%

Brief:

  • Legacy department stores like Nordstorm ($JWN) and Macy’s ($M) have underperformed the S&P 500 on a 1, 5, and 10-year basis.

👆5-year comparison between Nordstrom, Macy’s, and the S&P 500. (click chart to enlarge)

  • They did everything right: They invested heavily in e-commerce, didn’t open too many stores, and have been quick to experiment with new types of shopping formats, including stores that don’t carry any clothes per the WSJ.

  • Yet, like other department stores, their financial and stock performance suffered. With YTD performance clocking in at (26%).

Our view:

We have no idea if Nordstrom or any other legacy department store can pull-off a comeback. We think there’s a fair chance one of them will.

But without knowing the future, all we can rely on is price. Which is what we’re doing here.

What’s their chart telling us?

The trend is down. Price is at a level that has attracted buyers going back to 2005. If $25 breaks, the next level down is $20, followed by $10.

Trade metrics:

  • Entry: Between 25.50-$30

  • Stop: Weekly close under $24.80

  • Target: $67.75

  • Reward/Risk: 7.26 (126% upside vs. 17% downside) | You make $7.26 for every $1 dollar risked.

  • Warning⚡The weight of evidence suggests department stores are in secular decline. Nordstrom and Macy’s could be (probably are) value traps. Think carefully if the potential upside justifies your tolerance for risk and volatility.

ETFs that include Nordstrom:

Three slides from their 2018 investor presentation (HIGHLY RECOMMENDED):

Why do customers choose Nordstrom over other options? This goes back to our article on jobs-to-be-done-theory.

They are growing their share of younger shoppers.

Nordstrom Rack, Nordstrom’s discount store, is the fastest-growing segment within the Nordstrom footprint.

View the whole presentation here.

Additional resources:

Company homepage; Financial statements and valuation metrics; Q2 2019 earnings presentation; Recent 10-Q; 2018 annual report.


ETF SPOTLIGHT

$NERD ◾ Esports ◾ $9.8 million AUM

This is a tiny ETF, but one that’s trying to take advantage of a secular trend: the growth of Esports.

Visit the ETF homepage.

From their investor deck:

Our view:

We don’t know much about this market, but it’s one that interests us due to our childhood love of video games. We’ll keep you updated as we dig a little deeper😉


Thanks for reading, and have a great day!

Caleb

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Nothing in this post is to serve as investment advice. It’s for informational purposes only. Always do your own research🤨

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