Another dull day in the markets

Published: Wed 03 August 2022
Updated: Thu 04 August 2022
By steve

In markets.

Distracting agenda

Wrap

MARKET SNAPSHOT AS OF 0430 GMT 4 Aug  :

S&P 500 Index Mini Futures: 4,153.00; down 0.08%; 3.25 points
DJIA Mini Futures: 32,764.00; down 0.02%; 6 points
Nikkei: 27,902.26; up 0.58%; 160.36 points
MSCI Asia, Ex-JP: 520.81; up 0.51%; 2.63 points
EUR/USD: $1.0164; down 0.01%; 0.0001 point
GBP/USD: $1.2155; up 0.08%; 0.0010 point
USD/JPY: 133.70 yen; down 0.13%; 0.18 point
Spot Gold: $1,770.96; up 0.34%; $6.06
U.S. Crude: $90.89; up 0.25%; $0.23
Brent Crude: $96.91; up 0.13%; $0.13
10-Yr U.S. Treasury Yield: 2.7155%; down 0.031 point
10-Yr Bund Yield: 0.8675%; up 0.006 point

Basically, not much happened.

Iron Mountain Inc

Bear case:

  • heavily geared (debt:equity is fifteen times),
  • negative earnings growth (-7% YoY),
  • bad economics (the company keeps archive boxes of paper for companies that need space),
  • poor return on assets (3.94%),
  • $2mmm of current liabilities to finance (OK, some trade creditors, but still),
  • vulnerable to multiple compression (P/E ~30 ) aka rotation,
  • balance sheet assets may collapse if rates keep rising (presumably they are warehouses in marginal locations).

Bull case:

  • high dividend yield (~5%),
  • very steady historical revenue,
  • seems to be well managed, with a fairly demanding schedule of debt repayment historically,
  • cost of interest seems modest ($425 mm pa on $13.5 mmm of total liabilities).

I can see why people like this stock, and I understand that it’s doing some work to extend its market leading paper archiving into the digital world, but a company with expertise in collecting boxes of papers and storing them in warehouses is not likely to be that good at creating world-beating software (just to show my biases).

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