Stock market

I feel that this FTSE 250 business has all the winning ingredients for me to make high profits

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This FTSE 250 The company looks like the most promising investment in the index to me. It’s also down about 50% in value, with a nice 4% dividend yield. The name of the firm is Safe Store Holdings (LSE: Secured).

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The UK’s largest self storage group

The business has 181 stores spread across the UK, France, the Netherlands, Spain and Belgium. This makes me particularly attractive because it offers some risk protection in the form of geographic diversification.

Readers who know me will know that I love real estate investment trusts (REITs) for generating passive income.

And what’s more? Storage is even better. This is because while housing markets can crash in an economic downturn, storage units are more resilient. After all, when people are downsizing they often overuse storage units.

I always look for recession resistance in my portfolio because I want to sleep well at night. I can only do this if I know that I have properly protected myself against major risks.

Stable and low cost

It is unusual for a real estate company to have a balance sheet with more equity than liabilities. But Safestore is an exception to this rule. With its total assets to equity ratio of 65%, I am more confident in the firm’s long-term future.

However, he doesn’t have much cash. This means it may struggle to meet its short-term obligations without selling some of its assets.

Overall, I think I’m getting pretty good value for money here.

One of the best measures of price in real estate is called price-to-funds from operations. It is much better than the usual cost-to-earnings ratio because it does not include depreciation of properties. Therefore, it is a better measure of actual cash flow generation.

Safestore has price-to-funds from just 15 operations. Although this is slightly higher than the norm for the industry, the company’s better performance in growth and profitability means that it is more than certain. In fact, I think the market has undervalued it.

A closer look at risks

I mentioned that the business is globally diversified, which provides some protection against regional risks. But 75% of its revenue still comes from the UK.

So, it’s still a lot of exposure for one country. This means that if there is a recession in the UK, Safestore will actually suffer quite badly, even if its operations in other countries protect it.

But also, there is a lot of competition in the storage industry. You must have heard. Big yellow, which is another firm I love. There is little rivalry here, but any lapse in strategic choice for Safestore could see it lose market share to Big Yellow, or vice versa.

Am I going to buy it?

I’m currently considering buying Safe Store, as I’m trying to get a little more out of the dividend portion of my holdings.

I like the idea of ​​holding onto some storage companies, because in my opinion, the investment potential is uniquely stable compared to general real estate.

Let’s see if I invest in Safestore at the end of the year.


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