The big losers for the month were the REITs, with Digital Realty, DuPont Fabros, and CoreSite all down over 10%. The big winners were Rackspace and Terremark, which both reported y/y top line growth over 20%. In the case of the REITs, one factor holding them back is their low yields. DuPont Fabros only recently started paying a dividend, CoreSite has not begun paying them, and Digital Realty's current yield of 4.04 percent is lower than the current yield on 30 year Treasuries. Additionally, the "bond bull" is loosing steam, with TrimTabs Research reporting that bond funds and bond ETFs recently ended a steak of 99 consecutive weeks of cash inflows. If bond yields do continue to go higher as a result, that would put more pressure on the REITs to increase their dividend yields, and could further pressure their stock prices. In the last month, 10 year Treasuries yields rose 19 points, from 2.60 to 2.79, while 30 year yields rose 13 points to 4.11.
Outside of the REITs, Savvis started to slow down, rising just over 4% for the month, after rising 13% in October, and 43% in the 3rd Quarter. The company, which is not profitable, is trading at about 1.47x annualized revenue with 13% y/y top line growth, hardly enough to sustain such a big run up. Nonetheless, Wall Street has completely fallen in love with Rackspace, which is now trading at 78x annualized earnings (74x net of its cash), on 23% y/y top line growth. It's a remarkably well run hosting provider, but the stock is clearly ahead of itself. While the company has grown its bottom line 55% in the last year, this is primarily due to reductions in its SG&A/Revenue ratio, not its heavily hyped cloud services or other trendy topics that get Wall Street excited.
|DataCenterStocks.com Services Index|
|Company||Ticker||Mkt Cap||Nov 30 Close||Nov 1 Open||Monthly Chg|
|Index Value October 1||100.00|
|Index Value November 1||98.48|
|Index Value December 1 Open||97.88|