We came across a bullish thesis on Americold Realty Trust Inc (COLD) on ValueInvestorsClub by tahoe88. In this article we will summarize the bulls’ thesis on COLD. Americold Realty Trust shares were trading at $25.35 when this thesis was published, vs. closing price of $28.39 on Sep 20.
A row of self-storage units in a self-storage complex, showing the affordability and security offered by the company.
Americold Realty Trust (COLD) ranks as the second-biggest provider of cold storage services worldwide boasting a global reach that covers 1.5 billion cubic feet of storage space. Americold stands out in the industrial real estate field due to its specialized setup built to keep food at refrigerated temperatures, and its two-part business approach. The first part involves a high-profit warehouse business that works much like a typical real estate owner. It rents out cooled space to tenants and takes in rent based on how full the space is and the rental rates. The second part is a lower-profit but tough-to-enter service business that offers supply chain management assistance to clients helping them to handle stock through efficient throughput systems.
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The company’s stock has been performing falling behind both the broader REIT index and its industrial REIT competitors. But now, many of these issues seem to be getting better, and Americold is ready to bounce back. The basics of cold storage for the company are starting to look up, with the amount of goods moving through showing signs of getting better. Food makers are also saying that demand should pick up in the last half of 2024. This is a big change for Americold. As food production gets back to normal, the company might surprise people with better earnings for several quarters in a row.
Americold’s edge in the market stems from its size and key position in the food supply chain. The company and its main rival Lineage, hold move over almost half the cold storage sector in the U.S. This stronghold lets them offer a must-have service to big food makers putting up a big roadblock for smaller firms trying to break in. As food needs level off and efforts to cut costs keep boosting profits, Americold looks set to gain from easier year-on-year comparisons and a possible uptick in how the market values its shares.
Going forward, experts predict Americold’s stock price will hit $42 by 2027. This growth stems from rebounding throughput volumes increasing rents, and better service margins. Stockholders could see a 65% gain giving them a nice 17.6% internal rate of return (IRR) plus dividends. Americold looks like a good bet as the market picks up and cold storage basics keep getting stronger.
COLD is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held COLD at the end of the second quarter which was 34 in the previous quarter. While we acknowledge the potential of COLD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as COLD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.