UBS’ Best Stocks In The AI, Growth & Low Rates Era: Top 29 US Stocks

17. Prologis, Inc. (NYSE:PLD)

Number of Hedge Fund Investors In Q2 2024: 56

UBS’ Sector Rating: Neutral

Sector: Real Estate

Prologis, Inc. (NYSE:PLD) is an industrial real estate company that owns and operates logistics properties. These include airport logistics centers, fulfillment centers, and warehouses. Consequently, the firm is at the mercy of both the global economy and interest rates. Warehouse and other facilities are in higher demand and occupancy – to drive up rent rates – when economic growth is high and shipments are booming. Consequently, the fact that Prologis, Inc.’s (NYSE:PLD) shares are down 13.9% year to date is unsurprising. This has been driven in part by a massive 18% drop in April which was fueled to a large extent by the firm reducing its fiscal 2024 EPS to $3.25 from an earlier $3.325. As part of its third-quarter earnings, Prologis, Inc. (NYSE:PLD) reported an occupancy rate of 96% which was lower than the previous quarter’s 96.5%, and indicated that perhaps the market for its properties is yet to fully bottom out.

Baron Funds mentioned Prologis, Inc. (NYSE:PLD) in its Q2 2024 investor letter. Here is what the fund said:

“The shares of Prologis, Inc. (NYSE:PLD) underperformed during the second quarter. Prologis is a REIT that is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. The share price began to correct in April when the company reported strong first quarter financial results but slightly lowered its full-year outlook. Rent growth has been moderating in the industrial logistics real estate sector as tenants slow their decision- making amidst an environment of heightened macroeconomic uncertainty, while a wave of recently delivered new development projects provide tenants with more real estate options. We view these headwinds as transitory and remain quite optimistic about Prologis’s multi-year growth prospects.

We expect industry fundamentals will firm up in the coming quarters in light of still healthy levels of demand combined with a dearth of expected new development deliveries. Long-term demand is poised to benefit from several ongoing secular tailwinds, including the growth of e-commerce, the build out of “last mile” supply chains, and the desire for more “just-in-case” inventory of goods. Management, who we think is top notch, expects to grow cash flow at close to 10% per year over the next several years as the company resets the portfolio’s low in-place rents up to market levels and investments in development, data centers and energy begin to bear fruit.”