Public Storage (NYSE:PSA)

Housing slowly coming back but rentals are soaring. folks need to move to smaller space and will store their valuables. Div is 3.2%

Over valued

P/E ratio points to a share price that is unsustainable in the long term. If you have a RL position, you would be wise to close it and leave while you are ahead.

good balance sheet

Trendspotter

PSA has been a good performer over the years, but I see hard times ahead. When people are having trouble keeping their houses, they're not going to stay current on the storage units where they keep their extra "stuff."

In my city, legal ads announcing public auctions of the contents of storage units that are in arrears are now commonly found intermingled with the foreclosure and tax-sale notices that fill several pages each day in the local newspapers.

That bodes ill for a company with a large stake in that market. Their commercial and container segments also stand to suffer from the U.S. consumers new-found frugality.

As income falls, dividends fall, and since people buy REIT's for dividends, the price will go down with the dividends.

CRE

GOOD PLACE TO GO

good stock

I can't say whether this stock will under perform the S&P, because they're both going to take a beating. That said; Public Storage will come down hard, because we're in the grips of deflation.

Who, in their right mind, will pay to store old junk; when they can use this money to buy new items at 90% off? When money gets tighter, which it will, you can expect to see storage renters take a hike - and leave the owners with this junk to haul away.

This company has low debt and public storage demand is much more stable over time than demand for most product or service.

The preferred stock is an even better deal. You can earn around a

9% yield due to the discount on the shares and when the market recovers in the next 2-3 years, you get capital gains in excess of 25%. Not bad for an extremely safe investment.

As a 'Buy and Holder' with a time frame of 5 - 10 years, I like many things about this company:

Insider ownership: 15.49%
Qtrly Earnings Growth (yoy): 73.50%
Trailing Annual Dividend Yield: 3.00%
PEGulator: 0.68

And, in the last six months, insiders have purchased 18,000 shares.

LN Nov 08 pick

Macro downturn will make people move less, lowering demands for storage. This may already be reflected in their slowing growth and declining margins.

Also not crazy about the preferred-intensive capital structure, and a little suspicious that management is greedier than most (As Citi analyst pointed out on 1Q08 call, they paid themselves $25m for flipping half of the Shurgard acquisition they just made in 2006. That deal must have created lots of shareholder value, huh?)

Plus there's a major premium to competitors, due probably to the fact that their balance sheet looks pretty clean unless you consider the 7% yielding preferred to be kinda debt-ish.

PSA had nearly 900,000 trades on Monday, that's an incredible number. The stock has been steadily dropping for months, but that amount of trades suggests that those who are just now selling are getting a lot of takers -- hoping to profit on a down stock as it starts its upswing again very soon. Indeed, public storage is usually a good performer during down times given the rise in foreclosures and the need for some place --at a mere $50 or so per month -- to store their belongings.

The technicals on the stock are extremely good. And as people are displaced from there homes due to the housing crisis there will be an increased need for storage space. Because the displacement will result in downsizing but people are unwilling to part with there junk.

The languishing housing market could be be an asset for this company. People forced to move from their homes need a place to store their stuff. Public Storage to the rescue. Their P/E looks a little lofty now, but their forward P/E is only 16.40. The stock also pays a dividend, currently at 2.20%. StockScouter rates them 8.

people need storage for all the crap they couldn't afford and can't get rid of as they're getting foreclosed out of their homes.

It looks like they keep issuing preferred shares that get a considerably better dividend than the common shares. So, this one gets in trouble and the preferred shareholders continue to get a dividend and the common share holders are screwed... At least that was my read of it, a lot of the earnings go to preferred share holders at 6-7%, common shareholders get 2.7%.