Why Investors Need to Consider the Unusual Options Volume for Life Storage (LSI)

Though the relative discounts associated with last year’s implosion in the equities space – particularly for hard-hit technology shares – brings out contrarian vibes for once-popular enterprises, astute investors should consider “boring” but viable ideas like storage facility provider Life Storage (LSI). While LSI stock probably won’t entice passersby with glitz and glamor, it does offer a framework for credible upside.

For one thing, Life Storage – which is structured as a real estate investment trust (REIT) – delivered solid results for its most recent fourth-quarter earnings report. According to the AP, the company stated it had funds from operations of $144.9 million, or $1.69 per share, in the period. In contrast, analysts anticipated that funds from operations would hit $1.64 per share.

Per the AP, “[f]unds from operations is a closely watched measure in the REIT industry. It takes net income and adds back items such as depreciation and amortization.”

On the top line, Life Storage posted revenue of $274.7 million in Q4, exceeding estimates. Prior to the disclosure, analysts forecasted a tally of $271.9 million. To be fair, a downgrade against analysts’ expectations on per-share funds from operations in the current quarter diminished enthusiasm for LSI stock.

However, investors should also note another bullish angle impacting Life Storage: options traders may sense an upside opportunity brewing. Following the close of the March 1 session, LSI stock represented one of the highlights of Barchart.com’s screener for unusual stock options volume.

Specifically, total volume reached 17,864 contracts against an open interest reading of 14,505. Further, the delta between the Wednesday session volume and the trailing one-month average volume came out to 926.67%. Call volume reached 15,245 contracts while put volume reached only 2,619, leaving a put/call volume ratio of 0.17, mathematically favoring the bulls.

Moving forward, investors should consider these three upside catalysts.

Baby Boomers Will Undergird LSI Stock

According to one statistic, from now until 2030, 10,000 baby boomers will hit retirement age every day. Further, millions will officially retire, collecting Social Security checks and generally unwinding their life expenses. But why would that be important to LSI stock? Fundamentally, boomers will be looking to downsize but still keep important (but perhaps large) items for storage and safekeeping.

As the Motley Fool pointed out, this process of aging up and sizing down represents a natural lifecycle. However, because the baby boomer generation represented a massive, unprecedented influx of humanity, there logically will be greater demand for storage facilities.

Therefore, Life Storage may be in the right about not being gung-ho about competitive takeover proposals. With a bit of time and patience following the shock of the COVID-19 pandemic, LSI stock stands poised to benefit from the booming demand profile.

Millennials May Downsize by Choice

Another factor to keep in mind is that other wave of humanity, the millennial generation. According to the Pew Research Center, millennials represent the largest generation in the U.S. labor force, a status they achieved in 2018. Therefore, whatever behaviors they exhibit on average should carry a significant impact on the broader economy.

Fortuitously, LSI stock may represent a downwind beneficiary of millennial practices. As you know, many young first-time homebuyers found themselves priced out of the real estate market due to skyrocketing prices. Now, escalating interest rates crimp affordability. To better save up for a future opportunity, several millennials could choose to downsize by choice.

By renting smaller residential units and storage space for their overflow, young folks can eventually redirect their savings for a higher downpayment. Therefore, LSI stock deserves a closer look.

Cynicism May Also Undergird Life Storage

Finally, not everyone will be downsizing because they want to or chose to. Rather, many will find themselves downsizing due to economic coercion. Sure, the Federal Reserve’s aggressive monetary tightening policy helped control soaring inflation. Therefore, the acceleration of rental price hikes diminished considerably in several areas.

Nevertheless, rental costs remain sky-high compared to pre-pandemic norms. And the harsh reality is that wages have not kept up with these costs. Therefore, consumers must find a way to make ends meet. Generally speaking, a relatively easy method of achieving this goal centers on downsizing the residential unit and putting excess stuff in storage.

Granted, it’s not a comforting narrative. However, it’s the basic reality of our time, making LSI stock incredibly relevant.

• Stocks End Mostly Lower as Global Bond Yields Push Higher
• Meta Got Rich Running Ads, But Now, Its #1 Revenue Stream Is Threatened
• Are First Solar’s Latest Results Good or Bad News for Tesla?  
• The End Of Medical Middlemen in the American Healthcare System?