Prologis (PLD +0.95%) is a giant real estate investment trust (REIT). It has achieved a great deal of success of late, which understates just how well the business has been performing. And yet investors have soured on the shares since their price hit a high-water mark in 2022.
If you have $200 to invest, strongly consider buying Prologis stock and holding it for a very long time, perhaps forever.
A look at Prologis' business
At its core, Prologis is a very boring REIT. It largely owns warehouses, which are basically just big empty boxes. What makes the company so attractive for customers is not the boxes, but the location of the boxes. It operates in all of the most important transportation hubs in the world. So with one relationship, a company could pretty much solve all of its warehouse needs.
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Then there's the size of the company. It operates 1.2 billion square feet of warehouse space across 5,500 buildings located in 20 countries. And management believes it has another $40 billion worth of properties it can build on vacant land it owns. There are no other publicly traded warehouse landlords that come close to that mark.
That is one of the reasons why the REIT has a market cap of $120 billion. The interesting thing about that number isn't that it is large for a warehouse REIT -- it is large for any REIT at all. An investment in Prologis is an investment in a recognized industry leader. Add in an investment-grade-rated balance sheet and, despite the stock decline, Prologis looks like a fairly safe option in the REIT sector.
NYSE: PLD
Key Data Points
Prologis is putting up great numbers
Being big isn't enough to make a stock worth buying on its own. And given the stock price decline, it pays to ask what is going on at the business that has investors so worried.
The answer is nothing. For example, Prologis was able to increase rents on expiring leases by a whopping 84% in the third quarter. Occupancy was a very strong 97.1%. This is not a business that is struggling, though it would be fair to suggest that it can't keep up this level of performance forever.
And yet Prologis doesn't see anything on the horizon that suggests its business is going to fall off a cliff. Construction starts are reasonable and demand for existing assets remains strong, hinting that rent growth and occupancy will be resilient in the years ahead, even if results aren't quite as robust as they have been of late. The big change is likely in how investors view the company's prospects, not the company's actual prospects.
Indeed, when supply was particularly tight Wall Street jumped into the warehouse space. And now, despite results that have remained strong, investors have moved on to the next big thing. Yes, growth is likely to slow from here. But when you add in the company's dominant industry position, the access to capital markets it has because of its size, and the built-in growth it has due to its large portfolio of vacant land, there's still a lot about Prologis to like.
Think long-term with Prologis stock
Despite the investor enthusiasm that drove up Prologis' share price, it was never an exciting company. It is the kind of REIT that does one thing and does it exceptionally well. Which is why, with the stock still down so much, it is a great buy-and-hold investment option. You won't brag to your friends about owning it, but as it continues to raise rents up to market rates and build out new assets when demand is there, this giant company will continue to grow. And you can take advantage of that long-term growth with as little as $200.
