Be Greedy When Others Are Fearful, Buy This 6% Dividend Champion With Me

I think most investors and analysts are bearish when it comes to Tanger Factory Outlet Centers (SKT). Seeking Alpha happens to have a group of analysts who don’t share this majority view. I wrote an article on the dividend champion selling at an insane discount. I’ve been asked numerous questions since the article, so let me answer some of them for you. But before we start, check out SKT trading at more… of a discount:

I love a discount. I added to my position this morning.

The market is stricken with fear. Zombies have taken over mall REITs. Mall REITs are no longer inhabitable and will soon cease to exist. I may have embellished on why the market is stricken with fear. However, the market is pricing mall REITs at insanely low prices. My main coverage is on mortgage REITs and equity REITs. When it comes to mortgage REITs, the sector is overpriced (started to come down after Q3 2017 earnings releases). When it comes to equity REITs, there are enormous discounts for mall/shopping REITs. Let that sink in for a moment. While you’re thinking, recall this quote:

Instead of using this logic, we are seeing something else entirely. Analysts are noticing some equity REITs surrounded by fear and then looking for information to defend their“analysis”. Which in turn, perpetuates the fear that mall REITs are going to somehow cease existing.

Why the recent price drop

The “Amazon (AMZN) effect” is weighing on mall REITs. Amazon smashed estimates. Amazon beat on earnings and thoroughly beat on revenues. The growth was heavily influenced by Amazon Web Services and Whole Foods Market. That’s ironic. Amazon saw a strong quarter by owning physical retail stores.

Another factor was J.C. Penney (JCP) slashing their outlook. The company adjusted guidance for the year. For the year, guidance for EPS is now $ 0.02 to $ 0.08 instead of $ 0.40 to $ 0.65. After the news, JCP went down 21%.

These two factors led the market to drop prices on mall REITs. Perhaps, the big question is what are REITs to do about JCP going down? The answer is simple: replace them.

SKT is already done with that job. They finished it early by simply not having any JCP stores. From the Q2 earnings call:

“Teavana is the latest to announce closing and we have no Teavana locations in our Tanger portfolio. We also have no Sears, K-Mart, JC Penney, hhgregg, or GameStop stores.”

Why SKT is a buy today

SKT is trading at a mere 9.5x AFFO guidance for the year. SKT maintains a conservative balance sheet which prevents them from having any difficulty with their debts.

The dividend yield is nearly 6% and is easily covered by AFFO. The excess AFFO is available for reinvesting into the portfolio or repurchasing shares.

In the second quarter, management was actively buying back stock because it is immediately accretive to AFFO per share. SKT has a couple new properties opening up which should increase net operating income and AFFO per share.

Following those openings, SKT has relatively few capital expenditures coming up over the next couple of years. This makes it easier for them to grow the dividend and gives them the option of repurchasing stock faster than most REITs.

Serious problem

SKT offers both FFO and AFFO for investors. It’s even in their presentations:

One issue is that websites offer inaccurate information. For analysts who are trying to figure out mortgage REITs and equity REITs, this can be a serious problem.

I’ve taken a look at the sites which give out FFO and AFFO numbers in the REIT sector. They are often inaccurate. The test is rather simple. Investors should check the websites calculations to verify that they are accurate. When you do this test and find the numbers don’t match, dig deeper. Check the numbers against the press releases for Realty Income (O), National Retail Properties (NNN), and a few other large REITs. If you find frequent contradictions, that’s a problem. Make sure to insert mall REITs, such as Macerich (MAC), as well since they have more complicated statements due to the impact of JVs.

JVs (joint ventures)

In my view, GAAP creates the problem by not forcing standardized reporting of JV interests on a pro-rata basis.

Joint ventures can obfuscate what’s really going on. For instance, NNN is top notch for transparency and accounting quality. It starts to get mixed up when the company has major positions in JVs. Proportional consolidation would fix the problem, but we usually get “one line consolidation” which makes the statements ugly. Assuming the company owns positions in unconsolidated JVs, the depreciation related to those positions does not show up directly in any of the financial statements. To find it, you would need to look for a reconciliation on FFO or NOI. Quite simply, it wouldn’t be possible to correctly automate FFO in these situations unless the tool could pull data that is not in the income statement, balance sheet, cash flows, or changes in shareholder’s equity.

This is one of the reasons I find JV accounting so annoying. I really wanted a tool that would work, but without a standardized method that requires all JVs to be reported the same way, it can’t happen. When we go to AFFO, it is critical for an analyst to use judgment on which adjustments are reasonable. I agree with most of the major REITs, but a few of the smaller ones created silly adjusted metrics that were just useless.

Suggestion

When looking through a third party’s statements on a company, I suggest checking the actual company’s press release for each quarter.

I think SKT is still at attractive prices and the same goes for Simon Property Group (SPG). I would be interested in buying some MAC, but the price came back up materially over the last few weeks. I would prefer to align my portfolio more defensively given the high valuation on domestic equity markets. Credit spreads on rated bonds are also absurdly thin. The entire situation encourages me to be more defensive. However, I see quite a few Mall REITs trading around 30% to 70% of their net asset value per share. Some of those REITs are running high quality properties. I wouldn’t mind being part of a group purchasing the physical real estate. The stock price will fluctuate much more, but I get great liquidity and a huge discount on buying in.

Reconciliations and adjustments can be confusing

I’ve become accustomed to spinning through reconciliations and knowing what adjustments to keep or throw out. It took a while and a significant amount of time spent looking through both good and bad REITs to reach a conclusion. In my opinion, if you want to see an example of where lots of adjustments are garbage, look at Wheeler (WHLR). If you go back in time to Q2 2016, the Resource Capital Corporation (RSO) adjustments under old management were hilarious since it was an mREIT trying to use equity REIT adjustments. RSO’s adjustments under new management are reasonable.

O and NNN are always great. SPG is very high quality for a mall REIT while attempting to tackle the JV issue, but they have JVs and own a huge stake in a European mall REIT.

Final thoughts

Mall REITs have become out of favor. The current prices aren’t built around fundamentals or guidance. The prices are built around fear of malls dying. They will not die. The space the malls currently own definitely will not die. Whatever the better malls transition into will continue to use the space they own. I’m going to stake my money against the market’s fear by owning several mall REITs. I started buying in earlier this summer and will be adding more as I find great values. Often it is great values on great companies.

I do believe the sector is largely undervalued. However, I would not invest using an index. I have enough capital to diversify and can research each stock separately to ensure I am buying exactly what I want at the price I want to pay. Using an index works for investors who want the extra diversification, but for the ideal entry price, I would much rather pick individually.

If prices keep going down, I have the capital and stomach to buy more. Remember, when others are fearful… perhaps it is time to be greedy.

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Disclosure: I am/we are long SPG, SKT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: No financial advice. Investors are expected to do their own due diligence and consult with a professional who knows their objectives and constraints. CWMF actively trades in preferred shares and may buy or sell anything in the sector without prior notice. Tipranks: Buy SKT.

Editor’s Note: This article covers one or more stocks trading at less than $ 1 per share and/or with less than a $ 100 million market cap. Please be aware of the risks associated with these stocks.

Tech

Exclusive: This Startup Just Nabbed $5 Million to Solve a Thorny Software Problem

Deploying business software has gotten very complex.

Backplane, a startup that says it can help companies manage the complex software deployments of the cloud computing era, has emerged from stealth with $ 5 million in seed funding—and a service it says can ease the headaches of deploying new-age software.

Now that nearly every business, whether it’s a media company or an automaker, also builds its own software for its website or employee sites, the pain of building and running business software is ubiquitous.

San Francisco-based Backplane says its newly available Backplane Core service will help those companies manage how their data flows whether it ends up running on Amazon Web Services amzn or some other cloud data center, internal data centers, or all of the above.

Company founder Blake Mizerany was the first engineer hired at Heroku, a popular software development platform purchased by Salesforce crm for $ 212 million seven years ago and, more recently, CoreOS, so he knows a lot about how software is built.

Related: This Respected Tech Exec Is Leaving Salesforce for Amazon

With companies using software containers, mixing and matching various services, and putting their processes in various clouds, the problem is how to manage an efficient and secure data flow between on-premises data centers and various clouds.

That’s a lot of complexity. Companies now have to think about what’s running in various cloud data center regions and virtual public clouds (VPCs) within those configurations. (VPCs are computing resources in a shared public cloud and cordoned off for use by a single customer.)

“Customers would ask how we did this at Heroku, and my sad answer was that we had to build all our own load balancers and proxy servers and let them spread traffic across data centers to the cloud,” Mizerany tells Fortune. The truth is that most companies don’t want to have to worry about that stuff, so the new Backplane Core service, available as of now, will take that off their plate, he says.

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Byron Sebastian, Heroku’s former CEO and a former senior vice president at Salesforce, advises the company. The explosive changes in how software is built and deployed—much of it the work of companies like Heroku— has caused a bit of what he calls a “hangover.”

Related: Microsoft Expands its Azure Cloud Data Centers

“How do you manage all these different services? How do they find and secure one another? Right now, the answer to that is a lot of difficult manual labor,” Sebastian says. “Blake’s idea is to put more power into the hands of technologies and let them manage the network connectivity.”

The big promise of Backplane Core, he continues, is it will give customers one dashboard to manage that data flow, regardless of where it happens.

The seed round was led by Baseline Ventures with a contribution from Harrison Metal. Backplane and its nine employees will use the funding for further investment in sales, marketing, and product development.

Tech

The AI fight is escalating: This is the IT giants’ next move

Artificial intelligence is where the competition is in IT, with Microsoft and Google both parading powerful, always-available AI tools for the enterprise at their respective developer conferences, Build and I/O, in May. 

It’s not just about work: AI software can now play chess, go, and some retro video games better than any human — and even drive a car better than many of us. These superhuman performances, albeit in narrow fields, are all possible thanks to the application of decades of AI research — research that is increasingly, as at Build and I/O, making it out of the lab and into the real world.

Meanwhile, the AI-powered voice technologies behind virtual assistants like Apple’s Siri, Microsoft’s Cortana, Amazon.com’s Alexa and Samsung Electronics’ Bixby may offer less-than-superhuman performance, but they also require vastly less power than a supercomputer to run. Businesses can dabble on the edges of these, for example developing Alexa “skills” that allow Amazon Echo owners to interact with a company without having to dial its call center, or jump right in, using the various cloud-based speech recognition and text-to-speech “-as-a-service” offerings to develop full-fledged automated call centers of their own.

To read this article in full or to leave a comment, please click here

Network World Cloud Computing

The AI fight is escalating: This is the IT giants’ next move

Artificial intelligence is where the competition is in IT, with Microsoft and Google both parading powerful, always-available AI tools for the enterprise at their respective developer conferences, Build and I/O, in May. 

It’s not just about work: AI software can now play chess, go, and some retro video games better than any human — and even drive a car better than many of us. These superhuman performances, albeit in narrow fields, are all possible thanks to the application of decades of AI research — research that is increasingly, as at Build and I/O, making it out of the lab and into the real world.

Meanwhile, the AI-powered voice technologies behind virtual assistants like Apple’s Siri, Microsoft’s Cortana, Amazon.com’s Alexa and Samsung Electronics’ Bixby may offer less-than-superhuman performance, but they also require vastly less power than a supercomputer to run. Businesses can dabble on the edges of these, for example developing Alexa “skills” that allow Amazon Echo owners to interact with a company without having to dial its call center, or jump right in, using the various cloud-based speech recognition and text-to-speech “-as-a-service” offerings to develop full-fledged automated call centers of their own.

To read this article in full or to leave a comment, please click here

CIO Cloud Computing

A Windows Cloud build just leaked, and this is what we learned

Microsoft’s mysterious Windows Cloud is supposedly a stripped-down version of Microsoft’s operating system that runs only Windows Store apps. Microsoft’s not commenting, but an early build that leaked over the weekend appears to be authentic and gives further tantalizing hints of what the company may have in mind. 

Windows Cloud intrigues Microsoft watchers because of its uncanny resemblance to Windows RT, Microsoft’s failed ARM-based platform. It, too, could only run Windows Store apps, plus desktop versions of Internet Explorer and Microsoft Office. There are numerous reasons why RT never succeeded, but the gist is there weren’t enough apps and nobody wanted to run a hobbled PC.

To read this article in full or to leave a comment, please click here

CIO Cloud Computing

Oops, this Redditor accidentally deleted his company’s DNS in Microsoft Azure’s cloud

One Redditor has made a mistake that you can be assured he will not make again: He deleted an entire zone of his company’s Domain Name System in the Microsoft Azure cloud.

“I meant to delete a single record, but it’s the same button in the same place as deleting a zone. As soon as I hit the button I knew what I had done, then all our websites start failing,” the Redditor confesses.

That’s an oops. He goes on to describe how his unidentified company’s VOIP phones went offline and the backup domain controller began having issues resolving DNS.

Meanwhile, in the ‘when it rains it pours’ line of thinking, an unrelated error occurred AT THE SAME TIME on the company’s Hyper-V server network interface cards (NICs).

To read this article in full or to leave a comment, please click here

Network World Cloud Computing

See this year’s top 5 underrated Microsoft announcements

This was a big year for Microsoft. The HoloLens began shipping to developers, Windows 10 made it through its first year intact (though not without controversy), and the company got into the desktop computer market with a stunning mega-touchscreen.

But there were a few key announcements that flew under the radar this year. While they may not have the splash factor of a Surface Studio or HoloLens, these developments have the potential to alter Microsoft and the world for years to come.

Here’s the rundown on what you probably missed.

Microsoft’s new bot tools help build conversation partners

At its Build developer conference, Microsoft outlined a vision for a conversational computing platform. The idea is pretty simple: Traditional user interfaces are hard to understand right off the bat, so we should let people just talk with computers.

To read this article in full or to leave a comment, please click here

Network World Cloud Computing

The top 5 Microsoft announcements you likely missed this year

This was a big year for Microsoft. The HoloLens began shipping to developers, Windows 10 made it through its first year intact (though not without controversy), and the company got into the desktop computer market with a stunning mega-touchscreen.

But there were a few key announcements that flew under the radar this year. While they may not have the splash factor of a Surface Studio or HoloLens, these developments have the potential to alter Microsoft and the world for years to come.

Here’s the rundown on what you probably missed.

Microsoft’s new bot tools help build conversation partners

At its Build developer conference, Microsoft outlined a vision for a conversational computing platform. The idea is pretty simple: Traditional user interfaces are hard to understand right off the bat, so we should let people just talk with computers.

To read this article in full or to leave a comment, please click here

Computerworld Cloud Computing

IDG Contributor Network: Red Hat expected to rake in $2.4 billion in revenue this year

The king of Linux, Red Hat, continues its growth as a leading Linux vendor that’s betting big on the cloud. Yesterday, the company announced financial results for its second quarter of fiscal year 2017 ended August 31, 2016.

The company generated $ 600 million in revenue for the quarter, a 19 percent year-over-year increase. Red Hat is often credited with creating a business model around Linux and Open Source: a subscription based service and support model.

Subscription revenue for the quarter was $ 531 million, which accounts for 89% of total revenue. It was a 20% year-over-year increase. Based on these numbers we can safely assume that Red Hat will be generating revenues around $ 2.415 billion in this fiscal year. That makes Red Hat the most successful pure open source company to date.

To read this article in full or to leave a comment, please click here

CIO Cloud Computing

$29 for This Premium 4-Course Training on Amazon Web Services- Deal Alert

AWS, or Amazon Web Services, is the premier cloud computing platform that services companies worldwide. Master this in-demand platform, and you’re certain to command a hefty paycheck.

Unsure where to start? The AWS Mastery Bundle is a 4-course bundle certain to make you an authority on all things AWS–and turn you into a certified cloud guru.

The following courses are included in your bundle:

CIO Cloud Computing

IDG Contributor Network: Skype Teams desperately needs this feature if it has a chance to beat Slack

Unconfirmed rumors about Microsoft working hard on a team collaboration app called Skype Teams are running rampant. (Microsoft did not provide substantiation.) PC World has called Skype Teams a “Slack killer” and a report from MSPoweruser explains some of the features.

Yet, even if the product exists (and augments the more enterprise-oriented Yammer app owned by Microsoft), it will need to provide some innovative new features for group collaboration. The biggest one that’s missing today? It’s all over Reddit, it’s in some email apps, and it’s even in some comment threads including the one at Computerworld.

To read this article in full or to leave a comment, please click here

Computerworld Cloud Computing

IDG Contributor Network: Skype Teams desperately needs this feature if it has a chance to beat Slack

Unconfirmed rumors about Microsoft working hard on a team collaboration app called Skype Teams are running rampant. (Microsoft did not provide substantiation.) PC World has called Skype Teams a “Slack killer” and a report from MSPoweruser explains some of the features.

Yet, even if the product exists (and augments the more enterprise-oriented Yammer app owned by Microsoft), it will need to provide some innovative new features for group collaboration. The biggest one that’s missing today? It’s all over Reddit, it’s in some email apps, and it’s even in some comment threads including the one at Computerworld.

To read this article in full or to leave a comment, please click here

Computerworld Cloud Computing

This new Skype bot lets you chat with Spock

Microsoft has made no secret of its grand plans for chat bots, and this week it rolled out five new ones for Skype. Surely the most fun is “Spock,” a bot that promises to help you “learn the ways of Vulcan logic.”

Back in April, Microsoft debuted a preview of Skype bots, the artificial intelligence-based helpers it hopes will make it easier for users to get things done. Today, more than 30,000 developers are building bots for Skype, it says.

To read this article in full or to leave a comment, please click here

Network World Cloud Computing