Public Storage (PSA), Extra Space Storage, Inc. (EXR), Sovran Self Storage Inc (SSS): How Technology Helps This Sector Outperform the S&P 500

Please do the math
After packing up your storage space, you lock the door and leave the facility, with your “stuff” securely stored. Congratulations! At Extra Space Storage, Inc. (NYSE:EXR), you have just become one of “56 inputs into a predictive, forward looking pricing model.” In the normal course of business, Extra Storage aggressively raises rents for existing customers initially after five months, and then every nine months afterwards. This results in 50,000 customers per month paying an average of 9% more per month, out of a total number of about 650,000 customers. The company also does studies — 10,000 customers at a time — to make sure raising rates is optimal versus a control group of 10,000 customers.

Big picture, I believe more data and more technology will equal better long-term operations. This is a very sophisticated industry.

Investor takeaway
Unfortunately, these self-storage REITs are not a secret on Wall Street. They trade between almost 20 times funds from operations for Sovran Self Storage Inc (NYSE:SSS), to nearly 23 times FFO for Public Storage (NYSE:PSA). That means that these stocks are highly valued by Mr. Market. However, that’s not the entire story. Better access to capital markets allows these public REITs to acquire properties from private owners and manage them profitably thanks to economies of scale.

Check back later this week as I compare and contrast these four public self-storage REITs and make recommendations for my two top picks. In the meantime, I encourage readers to do your own research, and make some room in your portfolio for companies that grow profitably, while paying investors dividend yields that range between 2.5% and nearly 4%.

The article How Technology Helps This Sector Outperform the S&P 500 originally appeared on Fool.com.

Bill Stoller has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors and Zillow. The Motley Fool owns shares of Tesla Motors and Zillow. 

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