For the REIT sector, an improving economy typically means rising commercial property values and the ...
Top Picks 2019: Americold Realty Trust (COLD)
01/04/2019 5:00 am EST
Led by the millennial generation’s love of online shopping, research suggests that 70% of U.S. consumers will shop for at least part of their groceries through the internet in the next seven years, suggests Tony Daltorio, editor of Investors Alley's Growth Stock Advisor.
FMI/Nielsen reports that 3% of grocery sales took place online in 2017. But that number is forecast to soar to 13% ($100 billion) by 2024. With consumers embracing online grocery shopping, demand for cold storage facilities for storing frozen goods is rising.
That is forecast to lead to a need for greater U.S. cold storage space by perhaps in excess of 35 million square feet, according to research from the industrial real estate firm CBRE. This number may turn out to be a lot higher when you consider the steady rise in the number of consumers dining out goes hand in hand with additional demand for fresh produce, meat, poultry and fish.
That in turn also increases the need for refrigerated warehouses in cities across the U.S. Couple that with the demographic shift to more urban locations and the ever-increasing U.S. population, and the need for more cold storage buildings becomes obvious.
A specialty REIT focused on this sector is Americold Realty Trust (COLD), which successfully completed its $834 million IPO in January 2018. The stock is our top pick for conservative investors in 2019.
The company is the largest global and U.S.-based real estate investment trust focused on the ownership, operation, development and acquisition of temperature-controlled warehouses. It has a 23% market share in the United States and a 4.2% market share worldwide. About 82% of its revenues come from the U.S.
The company owns and operates 156 temperature-controlled warehouses, with approximately 928 million refrigerated cubic feet of storage, in the United States, Australia, New Zealand, Canada and Argentina, and owns a minority interest in a joint venture in China, serving more than 2,400 customers worldwide.
I want to emphasize again the uniqueness of its business. Americold owns temperature-controlled, mission critical infrastructure and leases it to more than 2,400 different food manufacturers and grocers.
Given the uniqueness of these assets, the company also provides the customary services necessary to properly preserve their goods and facilitate the movement from the point of manufacture through the supply chain to the point of consumer acquisition.
Here's an important stat to ponder: 96% of all the frozen food that you find in the grocery store comes through some company like Americold. The food manufacturers don’t do this themselves, nor do they invest in that infrastructure; it's left to specialists like Americold.
I expect Americold to even build on its lead as number one in the sector. That will be good news for investors because of the growth the refrigerated warehouse sector is experiencing. That makes Americold a great stock, offering both growth and income.
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