A Realistic Play for These Rough Times

Sometimes when I turn on my television and see commercial images of people gifting luxury automobiles, complete with annoying theme music and large red bows, I have to wonder what distant planet these advertisers inhabit. If even in my comfortable circumstances I find this sort of snobbery grating, I can only imagine how the many people who are living in less fortunate conditions feel about this particular brand of holiday elitism. That's particularly because, when I view my charts, I see a very different story. In the charts, I see a world in which dollar stores are outperforming luxury retailers. Beyond the simple trading implications, this tells me something broader about the state of the economy as the year 2011 limps toward its conclusion. In a world where a stock such as Dollar General (DG) is convincingly outperforming Saks (SKS) and Tiffany (TIF), it shouldn't be terribly surprising that similar manifestations of our economic realities are visible on the charts. For example, people are still losing their homes, and/or opting to move in with relatives. According to the Pew Research Center, the number of multi-generational homes increased dramatically beginning in 2007, surging more than 10% from 2007 through 2009, from 46.5 million to 51.4 million. This trend could accelerate as real wages fail to keep up with inflation, and as millions of young adults give up on the dream of home ownership and move back in with Mom and Dad. So, here's one relevant question: Where are all of these people going to keep their stuff, and who will benefit from it? For one answer, take a look at the chart of Extra Space Storage (EXR), which reached a new all-time high last week. This stock only trades about 1 million shares per day, and has market capitalization of just $2.25 billion. Extra Space has been moving steadily higher for nearly two years, and would be attractive on a pullback to its 50-day moving average, at about $22 per share. Extra Space Storage (EXR) -- Daily Source: TradeStation View Chart » Extra Space's more established, better-known competitor, Public Storage (PSA), boasts an equally impressive chart. Public Storage also trades about 1 million shares per day, but its market cap is about 10x that of its smaller rival. These two stocks have very similar-looking charts, with both having begun a steady rally in early 2009. Public Storage (PSA) Source: TradeStation View Chart » Public Storage is currently showing a small double-top pattern, indicating that a short-term pullback is likely, but its long-term trend points the way higher. Also, its current pullback in is occurring on very light volume. As with Extra Space, I'd look to the 50-day moving average as a potential entry point for Public Storage -- which, for the latter, is currently at $121.64. It's worth noting that both of these stocks are actually real estate investment trusts, so in addition to capital appreciation due to their rising stock prices, each boasts a respectable dividend. Extra Space currently yields 2.37%, while Public Storage yields just below 3%. I'm sure that, eventually, the housing market and the economy will recover, and these stocks will fall out of favor. But until we see light at the end of the economic tunnel, these names should continue to outperform.

A Realistic Play for These Rough Times

With so many losing their houses, storage facilities should continue doing well until the economy recovers.

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