Henry Nicosia ’24 gave an overview of the market’s performance since our last meeting. The NASDAQ, Dow, and S&P 500 all experienced big losses earlier in the week, but analysts are hopeful that the recent pullback is just a healthy market correction. The market tried to rally on Wednesday and into Thursday morning, however, this upward trend quickly came to a halt on Thursday afternoon. The biggest losers continue to be the big tech companies, which experienced huge slides from their all-time highs. This could be a sign that the market had significantly overvalued the likes of Tesla, Apple, Google, Amazon, and Facebook. Despite these recent losses, analysts are still extremely bullish on the tech sector and the tech giants long term.
Nick Tufano ’23 provided an update on the Fed’s recent activity and their continued efforts to stimulate the economy as the COVID-19 pandemic rages on. On August 27th, Jerome Powell announced that the target inflation level will be allowed to run higher than the long agreed-upon 2% figure. He argues that the US has been operating at an inflation level too low for the means of our current economy, even prior to COVID-19. The Fed is now less likely to raise interest rates as unemployment drops, this will lead to an aggressive bullish mindset for the markets. While many credit Jerome Powell and the Fed for the stock market’s quick recovery, there are many out there who believe the Fed may now be overstimulating the economy.
Energy Analyst Tate Harobin ’22 shared his thoughts on the legal battle between Citi and Brigade Capital Management, our “Spotlight Story” of the week. Citi was hired as the administrative agent on 2016 loans to cosmetics company Revlon and was responsible for facilitating the loan payments. As part of the loan restructuring Citi was supposed to wire $9 million to Brigade Capital Management and other Revlon creditors. Unfortunately, someone at Citi added two extra zeros and actually wired $900 million instead of $9 million, Brigade then quickly turned that transfer into cash. Brigade and others are refusing to pay it back, claiming that Citi is yet to provide an explanation for the error. Meanwhile, Citi is claiming that it has the paperwork to back up its claim and is demanding repayment. The lesson is you should always check those zeros when making multimillion-dollar transfers.
Jimmy Lapsley ‘24, TMT Analyst Nick Sant Foster ‘22, and Chairman of the Board Parth Patel ‘21, successfully pitched a position in Digital Realty to the club. Here is an overview of their pitch and why they believe DLR will be a great fit for our portfolio.
REIT stands for Real Estate Investment Trust. They were created by Congress in 1960 to give all Americans the opportunity to benefit from investing in income-producing real estate. REITs allow people to invest in real estate without actually having to go and buy a property. Datacenter REITs own and manage facilities that companies use to safely store data. They offer a range of products and services to help keep servers and data safe, including providing uninterruptible power supplies, air-cooled chillers, and physical security. Data Centers REITs are the home of the “cloud,” the physical epicenter of the internet. Why should the Club invest in a Datacenter REIT? Data Center REIT stocks have soared, and work from home may be here to stay as the world transitions to a new normal after the COVID-19 pandemic. There has been a relentless growth of the cloud and this growth will continue as the world becomes even more cloud-based. Why Digital Realty? DLR formed in 2004 and is the largest wholesale data center provider. It is a real estate investment trust that invests in carrier-neutral data centers and provides colocation, wholesale, and peering services. The company owns interests in 225 operating data center facilities in the United States, Europe, Asia, Canada, and Australia. DLR has donated $1 million+ to COVID relief. Key Data for DLR: Current Price: $146, 52 Week High: $165.50, 52 Week Low: $105, 1-Year Target: $162, P/E Ratio: 52.19, EPS: $2.84, Annualized Dividend: $4.48, Dividend Yield: 3.09%
Digital Realty’s Executive Team consists of CEO- A. William Stein, CFO- Andrew Power, and CIO- Greg Wright. In recent years they have expanded the board of directors to offer more diverse solutions and have also raised dividend yield for the past 15 years. Assets have grown 240% and their Top 20 Customers include large companies such as IBM, Facebook, and Oracle. Jimmy, Nick, and Parth concluded their pitch by citing DLR’s strong financials, stable earnings, and their attention to sustainability as key reasons to invest. They also emphasized the rapidly growing tech industry, low interest-rate environment, and the opportunity to diversify our portfolio.