STORE Capital (STOR): Thank you, Warren Buffett

$STOR Announces that Berkshire Hathaway has invested $377 mlnin the company, representing 9.8% of total shares out… https://stocknews.com/news/stor-announces-that-berkshire-hathaway-has-invested-377-mlnin-the-company/

— StockNews.com (@StockNews) Jun. 26 at 05:50 AM

For the record, I owned $STOR before Warren Buffett 😉

— Charles Sizemore (@CharlesSizemore) Jun. 26 at 08:29 AM

Thank you, Mr. Warren Buffett.

Yesterday, up-and-coming triple-net retail REIT STORE Capital (STOR) got a major boost when the company annoucned that Buffett’s Berkshire Hathaway (BRK.B) had recently purchased nearly 10% of the company.

Prior to the announcement, STORE had been having a rough year.  Amazon’s (AMZN) assault on traditional brick-and-mortar retail has been unrelenting, and investors have responded by dumping high-quality, triple-net retail REITs like STORE.

Hey, I get it. As we saw with Spirit Realty Capital (SRC),  a struggling retail tenant can cause major headaches for a landlord, and investors worry that this is only the tip of the iceberg. But as is typical, they’ve overreacted and thrown out the baby with the bathwater.

To start, about two thirds of STORE’s portfolio is invested in properties that cater to services, including everything from movie theaters to preschools. The remaining third is split roughly evenly between retail properties and light industrial properties.

Unless Jeff Bezos can find a way to deliver your children via aerial drone to Amazon-operated preschools (and hey, it could happen…), STORE would seem pretty close to Amazon-proof.

It’s also worth noting that STORE’s insiders have been steady buyers of the stock.

InsiderPositionDateBuy/SellSharesTrade Price ($)Cost ($1000)
Long Catherine F.CFO, EVP and Treasurer5/10/2017Buy4,90520.39100.01
Sklar Mark N.Director5/10/2017Buy5,00020.34101.7
Donovan Joseph MDirector5/9/2017Buy5,00020.81104.05
William FranklinDirector3/15/2017Buy4,00022.9991.96
Seadler EinarDirector3/13/2017Buy4,44022.4699.72
Long Catherine F.CFO, EVP and Treasurer3/13/2017Buy5,55022.52124.99
Volk Christopher HPresident and CEO3/10/2017Buy11,10022.75252.53
Burbach Christopher K.EVP - Underwriting3/10/2017Buy5,50022.65124.58
Smith Quentin P. Jr.Director3/9/2017Sell1,40023.0632.28
Donovan Joseph MDirector12/1/2016Buy4,35024.15105.05

Source: GuruFocus

While I would never buy a stock purely because its insiders were buying, I definitely see it as a major positive. The people running the company are generally going to have a better grasp of its competitive challenges than passive investors reacting to news headlines.

At any rate, it will be interesting to see if Mr. Buffett’s purchase causes a wide-scale reevaluation of triple-net retail REITs or if this was simply a one-off event that will quickly fade. But while we’re waiting for the market to handicap all of this, I’m happy to continue collecting the 5.6% dividend indefinitely.

Disclosures: I’m long STORE Capital via my Dividend Growth portfolio.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.