In Monday's column I wrote about the acceleration of two trends in this country. The first was the explosion in the virtual workforce since the pandemic. The second was the great migration out of cities such as Chicago, San Francisco and New York for nearby suburbs as well as smaller cities in other states. Today I'll talk about a few specific winners and losers due to these two ongoing trends.
The value of commercial real estate in places such as Manhattan has taken body blows from each of these developments, especially in the category of commercial office space below Class A. You can see this impact in the chart of Vornado Realty Trust (VNO) , one of the largest commercial real estate landlords in New York City.
Vornado shares have lost more than 50% of their market cap in the last year, though most of those losses have occurred since May when the Federal Reserve began implementing a series of significant rate hikes. Even with Vornado's 10% dividend yield I am not ready to bottom fish in this area. The combination of rising interest rates and tepid occupancy rates should remain big headwinds for this sector for the rest of 2022 at a minimum.
I am more likely to pick up some shares of Amerco (UHAL) , which is off more than 25% from its year-to-date high. Even with the recent decline, the stock has more than doubled off its pandemic lows.
The provider of the iconic U-Haul moving trucks has been a big beneficiary of the increasing amounts of intrastate moves. In addition, Amerco has a rapidly growing self-storage business that had over 25% year-over-year revenue growth last quarter. Amerco stock is not expensive at under 9x forward earnings.
I have been adding shares to my core holdings in The St. Joe Company (JOE) in recent months. This land bank and real estate development concern has been hit by the slowdown in the housing market and also got dinged in the aftermath of Hurricane Ian. However, St. Joe's huge land holdings just north of Tampa Bay in Florida will continue to grow more valuable over time as people keep flocking to the Sunshine State.
Finally, Upwork Inc. (UPWK) looks interesting here after the stock has taken a 75% haircut over the past year as the fizz has gone out of growth names. Upwork operates a marketplace that connects businesses with various independent professionals and agencies. Its business benefits from the rising virtual workforce. Upwork is seeing revenue growth north of 20% and looks like it will get to breakeven status in fiscal 2023.
