Greystone Capital recently released its Q3 2020 Investor Letter, a copy of which you can download here. Greystone is a privately held investment company. The investment firm seeks to simplify and add value by identifying opportunities in good and bad markets. During the third quarter of 2020, returns for separate accounts managed by Greystone Capital ranged from +10.4% to +22.4%. The median account return was +15.8%. You should check out Greystone Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the said letter, Greystone Capital highlighted a few stocks and Power REIT (NYSE:PW) is one of them. Power REIT (NYSE:PW) is a real estate investment trust that owns sustainable real estate. Year-to-date, Power REIT (NYSE:PW) stock gained 178.6% and on November 6th it had a closing price of $25.70. Here is what Greystone Capital said:
“I spent a good chunk of the quarter doing a ‘deep dive’ on REITs as a potential investment opportunity for Greystone. I came away with the understanding that REITs can have their place within a concentrated portfolio but like most of our investments, ownership would have to be predicated on the right situation with material upside existing outside of just dividend income and inflation-like growth in rental income or capital appreciation.
The most well-run REITs with the best property types and locations typically trade above their net asset value (NAV) and can be difficult to purchase at a discount. Occasionally special situations arise, of which I found 2-3 during the quarter and subsequently purchased one for client accounts. Clients now own Power REIT (PW), a specialized REIT with legacy ownership in railroads and solar farm assets, now focused on the acquisition and ownership of Controlled Environment Agriculture (CEA) properties for use by growers and manufacturers of cannabis. This is an interesting area of property ownership that is ripe for growth as nearly all operators within the industry lack access to traditional sources of capital given the perceived risks surrounding their industry and main crop. This is where PW comes in, serving as a landlord and renovation / construction financing arm for cannabis businesses. To date, Power REIT has acquired ten properties totaling nearly 200,000 sq. feet in the past two years alone. These acquisitions combined with their legacy assets should generate core FFO per share of nearly $2.00 for FY2021, with a large acquisition pipeline in place set to further boost earnings moving forward.
Like most microcaps, Power REIT comes with an embedded discount due to its small size, lack of analyst coverage, and until recently limited investor relations efforts. However, given their phenomenal performance during the past year, massive secular tailwinds, and limited competition, its only a matter of time before continued execution drives the share price higher as the market digest the story and fundamentals. PW currently trades at less than 10x core FFO, a below market multiple, and even cheaper compared to their only publicly traded competitor – Innovative Industrial Properties – which trades at more than 30x core FFO.
I’ve had numerous conversations with CEO David Lesser, who I believe is the right person to be running this business and someone who understands the opportunity in front of him. I like how he thinks about capital allocation, and I came away from our conversations and from my research thinking that PW is in the early stages of growth and the business could potentially be worth multiples of the current price.”
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Video: Top 5 Stocks Among Hedge Funds
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