We recently compiled a list of the 11 Best Self Storage and Apartment Stocks to Buy Now and in this article, we discuss whether CubeSmart (NYSE:CUBE) is the best self-storage stock to buy now.
The American dream of sprawling living spaces is undergoing a transformation. Increasing housing costs in densely populated areas and the rising need for frequent relocations have led more people to use self-storage facilities. Furthermore, as families expand and accumulate more belongings, the demand for additional storage space continues to grow.
The self-storage sector experienced many changes from 2020 to 2023. The pandemic fueled a boom, with users increasing by 970,000 and sales volume nearly tripling between 2020 and 2021. This boom was driven by relocations, remote work, and increased online shopping. However, 2022 saw moderation with declining home sales and consumer spending leading to slightly lower rental rates and a sales volume drop. The first three quarters of 2023 continued this trend, with economic factors contributing to a further downturn.
Looking ahead to 2024, the self-storage industry is expected to maintain stable occupancy rates and rental income, driven by the ongoing housing shortage. Although a slight uptick in new facilities (4.4%) is predicted, the housing shortage is likely to continue driving demand. According to Mordor Intelligence, the US self-storage market is projected to reach nearly $50 billion by 2029, reflecting a steady growth rate of 2.44%. This indicates continued investor confidence and a healthy market outlook.
Meanwhile, in the apartment sector, rent growth in 2024 is forecasted to be moderate, ranging from 2.5% to 3.7%. The sector is expected to experience slightly stronger growth in 2025. However, with the potential weakening of the labor market and increased supply, some areas may require rent concessions and reductions.
Overall, the US residential real estate market is experiencing steady growth, valued at $2.5 trillion in 2023. This positive trend is expected to continue as the valuation of this market is projected to reach $2.8 trillion by 2028. This jump in the valuation of the residential real estate market translates to a compound annual growth rate (CAGR) of 2.04% during the forecast period. Apartments hold a substantial share of the sector’s total demand. This dominance is likely due to the high number of apartment units being completed, with completions up by 26% as of 2023.
Our Methodology
We have compiled a list of the best self-storage and apartment stocks to buy based on hedge fund sentiment toward each stock. Our assessment of hedge fund sentiment is derived from Insider Monkey’s database of 919 elite hedge funds as of the first quarter of 2024. The best self-storage and apartment stocks to buy have been ranked in ascending order of the number of hedge fund investors in each company.
“Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).”
Is CubeSmart (NYSE:CUBE) the Best Self Storage Stock to Buy Now?
CubeSmart (NYSE:CUBE)
Number of Hedge Fund Holders: 25
CubeSmart (NYSE:CUBE) is a prominent player in the US self-storage industry. The company manages a sizeable portfolio of self-storage facilities, with over 1,479 locations across the country. This vast network makes them one of the top three owners and operators of self-storage properties in the country.
CubeSmart (NYSE:CUBE) reported its financial results for Q1 2024 recently. The company achieved diluted earnings per share (EPS) of $0.42, while the funds from operations stood at $0.64 per share. Furthermore, the company’s same-store net operating income for 598 stores saw a YoY decline of 1.9%, primarily due to a 5% rise in operating expenses.
Meanwhile, the average same-store occupancy rate during the quarter was 90.2%, ending slightly higher at 90.4%. CubeSmart (NYSE:CUBE) completed the acquisition of two stores during the quarter, totaling $20.2 million. Furthermore, the company successfully expanded its third-party management platform by adding 68 stores in the first quarter of 2024.
With its strong financial performance and market position, 16 out of 30 analysts are recommending CubeSmart (NYSE: CUBE) as a “Buy.”
Here is what Diamond Hill Capital, an investment management company, wrote about CubeSmart (NYSE:CUBE) in its investor letter for Q4, 2023:
“Other top contributors in Q4 included CubeSmart (NYSE:CUBE), Webster Financial and Parker-Hannifin. Shares of self-storage real estate investment trust CubeSmart rose as storage rents showed signs of bottoming in Q3, which could boost fundamentals looking forward. Further, REITs more broadly rallied during the quarter as long-term interest rates rapidly declined.”
Overall, CubeSmart (NYSE:CUBE) ranks 10th among the 11 best self-storage and apartment stocks to buy now. You can visit the 11 Best Self Storage and Apartment Stocks to Buy Now to see the other self-storage and apartment companies that are on the hedge fund radar.
While we acknowledge the potential of self-storage and apartment stocks, 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 more promising than NVIDIA 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 on Insider Monkey.