Sometimes bigger is better. An uncertain market like this, with inflation and rising interest rates and maybe even a recession on the way, is a good time to look at the biggest players in growing industries as a place to stash cash and watch it grow.
Three to consider here are Equinix (NASDAQ:EQIX), the country's largest owner of data centers; Prologis (NYSE:PLD), the largest warehouse owner; and American Tower (NYSE:AMT), the cell tower giant.
These companies are real estate investment trusts (REITs), obliged to return at least 90% of their taxable income to shareholders. Their dividend payouts help boost their total return, of course, but it's their profitable growth along with their industries that have made them such top performers.
Here's a look at how each of these stocks has done against the Dow Jones Industrial Average over the past 10 years. Of course, past performance is no guarantee for future gain but there is reason for optimism about each of these.
EQIX Total Return Level data by YCharts
Equinix
Equinix has grown from its 1998 start as a multi-tenant data center into one of the world's largest providers of digital infrastructure, with about 11,000 employees and 220 locations on five continents.
Azure, Amazon Web Services, and Google Cloud rely on Equinix for co-location of their own data services, as do major financial institutions, manufacturers, retailers, government agencies, and everyone else committing their operations to a digital-first world.
Equinix is coming off of a quarter that nailed down 4,200 deals with more than 3,100 customers, the best quarterly net bookings performance in its 24-year history, and it currently has 43 expansion projects underway in the United States, Japan, India, and Australia.
That kind of growth trajectory just adds to the allure of a stock that is currently down about 21% year-to-date. The yield may be a modest 1.8%, but Equinix has raised its dividend for seven straight years and it's one of only a couple pure-play data center companies left after a spate of takeovers.
American Tower
American Tower is one of those big players investing in data centers. The largest of cell tower providers out there just bought itself its own data center operation -- fellow REIT CoreSite Realty -- adding 25 data centers that American Tower can integrate into its burgeoning global digital infrastructure business.
American Tower already has about 221,000 sites in 25 countries on six continents and counts all the major mobile carriers and many others as clients dependent on its services for the expansion of not only 5G networks, but an array of other connective mobile services in developing and well-developed markets around the world.
Feeding a growing global appetite for mobile data has made American Tower a money-making machine since its 1998 IPO. That appetite just keeps growing. The company is guiding property revenue growth of 14% in 2022 and a jump in funds from operations (FFO) by 8.8%. At a share price that's about 10% down year-to-date, this could be a good time to climb aboard.
Prologis
Prologis is a billion-square-foot gorilla in the logistics business, with about 4,700 properties on four continents in a business characterized by intense demand and soaring rents. The company's stock, meanwhile, has taken a tumble after soaring some 70% during the pandemic e-commerce boom.
In its 1Q22 earnings report, Prologis said its earnings growth is strong enough already to provide years of growth even without raising rents. That's a good thing, since raising the rent might not be so easy in a cooling, inflationary economy.
In that report, CFO Timothy Arndt, said, "The long-term growth outlook for our business and balance sheet has never been stronger."
That could point to a buy for this company that's such an essential part of the supply chain that the Biden Administration has made Prologis part of the Freight Logistics Optimization Works (FLOW) project aimed at improving the flow of goods by better sharing data.
Specifically, the feds are interested in Prologis's data platform it uses to analyze industry trends. And, it would stand to reason, that insight is being used by the company itself to make good decisions on its own in terms of pricing, markets, and more.
A good thought here might be scooping up some shares of this industry leader while its stock is down about 25% year-to-date.
PLD Funds from Operations (TTM) data by YCharts
A $1,000 investment in your future
The chart above shows how each of these companies has been steadily increasing their FFO over the years, an indicator of their ability to turn cash flow into profit and investor payback.
Investing in great companies and sticking with them is a proven way to build wealth, even if it can be tough to do so during times of turmoil. Each of these stocks is down sharply in price, but not in potential. A $1,000 investment in each or any of these could be a great start in growth investing.
