During every market cycle, fads happen. They become very obvious in hindsight, but the tricky part is recognizing them in real time. My prediction? Some real estate investment trusts that are currently being touted by investment analysts will be trading at the exact same prices five or so years from now (assuming the markets are rationally valued at that time.) Even if the profits grow, the countervailing force of valuation compression will be a nasty offset ensuring mediocre returns.
I’ll give an example. I just finished reviewing a company called Iron Mountain. It is a giant data manager that stores documents, communications, and official records for corporate clients. The investor community loves this … Read the rest of this article! “The Folly of Form over Substance”