In this week's installment of "One to Watch," Fool.com contributor Matt Frankel, CFP, explains why retail real estate investment trust Tanger Factory Outlet Centers (NYSE:SKT) is at the top of his watchlist. And, host Jason Moser suggests that listeners keep an eye on Ellie Mae (NYSE:ELLI) -- just hours before it announced it was being acquired!
A full transcript follows the video.
This video was recorded on Feb. 11, 2019.
Jason Moser: Jumping into "One to Watch" for the coming week. What's the stock that you've got on your radar, Matt? What's your one you're watching?
Matt Frankel: Mine is Tanger Factory Outlets, ticker SKT. Since we already talked about Realty Income and the good kind of retail, I wanted to push that a little bit further. This is another one that I own, not quite to the magnitude that I own Realty Income. Tanger is a great dividend stock, pays about 6.3% right now. It's also a kind of retail that's not terribly vulnerable to e-commerce. The nature of outlet retail is very experiential. I don't know about you, but the reason that my wife and I go to the outlets from time to time is to find stuff that we can't find anywhere else. It's got the experiential component, it's got a discount component, which keeps people physically going to those properties instead of browsing online equivalents.
They release their earnings today. By the time you're hearing this, their year-end will probably be out. Pay attention to their occupancy rate. Pay attention to any concessions they're making to tenants to keep them around. More importantly, pay attention to their future plans of how they're planning to adjust to the new retail environment. They've been gradually adding more dining options and other experiential components to their properties to further insulate them from e-commerce headwinds. Like I said, great dividend payer, 6.3%. Good coverage ratio. That's not in danger anytime soon. If that one dips, I may just add to my position in that.
Moser: Well, there you go. I like outlet shopping. You know what I find really helpful, an example of one brand that's done a good job of incorporating the outlet shopping into their app is Under Armour. A lot of times, I'll just open that app and go straight to the outlets section. You find all of this stuff that they have on sale or closeout or whatever. They're not the only ones doing it, but yeah, outlet shopping, you can always find some good stuff at some good prices.
I'm going to go with a company a lot of folks recognize here, Ellie Mae, ticker ELLI. Earnings are out on Thursday. This one is interesting to me. Ellie Mae has had a great year thus far. It's up something like 30%, and this is on the tail of a tough 2018. It got to the point here where the housing market was becoming a little bit tricky, tighter housing inventory, rising interest rates, was all fueling low home affordability, so they were getting dinged on the purchase side and the refinance side. As rates go up, people tend to refinance less. That's all really what Ellie Mae does with their lending platform. So, the language on last quarter's call wasn't all that exciting. They were kind of dull, a little down in the dumps maybe. I'll be interested to see how they feel about things going into this call and the rest of the year, especially because we've heard talk about even potentially rates coming back down a little bit. A lot of people out there projecting that the Fed's not going to do anything else to rates for the rest of the year. Who knows! It's going to be interesting to me to see how their attitude is on the call. Either way, still one I like. Still own shares myself.
Speaking of "One to Watch" and shares we own ourselves, Matt, you bought into my "One to Watch" from last week, didn't you?
Frankel: [laughs] I did. I bought Markel shortly after earnings, when it dipped. Just over $1,000, I got a couple of more shares. I was very excited! I was glad Jason put that on my radar last week.
Moser: [laughs] Well, I think you and I feel the same way about that company. I'm glad you were able to add a few more shares to your portfolio.
Jason Moser owns shares of Ellie Mae, MKL, UAA, and UA. Matthew Frankel, CFP owns shares of MKL, O, and Tanger Factory Outlet Centers. The Motley Fool owns shares of and recommends Ellie Mae, MKL, UAA, and UA. The Motley Fool recommends Tanger Factory Outlet Centers. The Motley Fool has a disclosure policy.