Adversity Is Bitter, But Its Uses May Be Sweet
- CORR has become a battle-tested REIT that is now better prepared to scale into a safer investment platform.
- As a measure to combat risks, CORR is continuing to grow in size such that it can mitigate tenant concentration.
- We remain bullish in regard to the company’s business model and specifically the diligence in sourcing critical mission assets.
I first recommended shares in CorEnergy (CORR) in January 2015 and I even titled my article, My REIT Underdog Pick For 2015, and then in November 2015, I wrote another article explaining that CORR was My Worst REIT Pick For 2015. I keep riding the bull hoping that CORR would eventually bounce back, and boy did it bounce.
Over a year ago, I wrote an article titled, Could CORR Soar, Again?, in which I explained that:
“CorEnergy demonstrated success on both pillars of our thesis, suffering no economic changes to either lease…2016 proved to be a year of validation for CorEnergy and for the real estate investment trust structure as a way for investors to access the benefits of the infrastructure asset class.”
At the time I wrote the article (May 2017), I decided to upgrade CORR from a HOLD to a BUY and increased my target price to $31.00 per share. Since that time, CORR shares have increased by ~7% (closing at $36.17).
Given the strong growth potential for “dedicated infrastructure” assets — mostly pipelines and storage assets — CORR offers a compelling value proposition driven by stable, high-cash-generating business models in the midstream that provide very desirable investment characteristics.
CORR owns assets that are critical to upstream counter-parties, that are located in desirable fields that are integral to their overall operations. CORR has proven that the revenue stream is reliable, even in periods of distress, as long as the assets are critical to the upstream operators. Having come out of the energy crisis with its strategy validated, CORR has become a battle-tested REIT that is now better prepared to scale into a safer investment platform. As Benjamin Graham famously said:
“Adversity is bitter, but its uses may be sweet. Our loss was great, but in the end we could count great compensations.”