Part 1 Part 2
How ‘Internet Royalties’ Work (and why you’ve probably never heard of them)
In September of 2010, the first ‘Internet Royalties’ were made available to the public.
And on the very first day, investors spent a total of $270 million buying in.
Ever since then, daily ‘royalty’ payouts have ranged anywhere from a mere $840 to $94,350….
I will leave most of the exaggerating quotes from the ad for good of course, as most of it is misleading as we get more references to Internet giants on the blather, and pretty ridiculous to be unbiased.
No! The Internet Royalties is not something that The Wealth Advisory newsletter vendors know that you don’t. But don’t let this stand in the way, allow me a little more thought and I will let you know my take on it. As I end up with very little clues for an appropriate answer.
A few more clues please.
You only need about $35 to get started.
And remember, you don’t have to own stock in ANY of these companies in order collect “royalties” — not Netflix… not Amazon… not Microsoft… not ANY of them.
I am sure it’s not an Options strategy or an Income Trust, so what exactly are they touting here. Let me ponder over the above clue, and a little bit of Google’ing on the subject. I could sense that it’s an REIT and it must be CoreSite (COR), it is a datacenter REIT priced in the range of $35 right now.
Yes indeed CoreSite raised $270 million through an IPO in its launch, but it’s not an Internet Royalty though, the way they blather in their ad. CoreSite (COR) rents out disk space to a large customer base from large corporations to smaller ones who need more than just disk space. Well, they have some advanced services too but at heart it’s just a datacenter company.
I consider CoreSite to be a kind of commodity business given the intense growth of cloud based services ranging from server co-location to backbone colocation of telecom hubs for power management and a range of services. You can well expect the sector to grow steadily and faster with rapidly advancing technology.
But a huge $48,000 or more over the next year is bizarre without putting in a gargantuan initial investment. So this another teaser pitch that conveniently ignores, the initial investment, for the benefit of the newsletter vendor that asks potential subscribers to shell out around 50 bucks just to know the hyped stock.
Indeed CoreSite is a growth REIT with a decent dividend yield, has almost tripled in the last couple of years. Well, but that’s very unlikely to happen in the future. I particularly like CoreSite and it’s cheap with good sustainable growth in the small sector. But to call it an Internet Royalty or compare it to big giants such as Google, Amazon, or Netflix is an overstatement.
And as you already know REIT’s are influenced by interest rates and competitive rates available in other income focused investments, that’s the reason most of the REIT’s have slumped 5% to 10% in the in the last couple of weeks owing to a rumor from the Fed about Quantitative Easing.
While I am of the belief that there are other REIT’s worth looking at in this sector, like Equinix Inc (EQIX), CyrusOne (CONE) what do you think, for it’s your money that’s at stake. If you have your own musings on the sector let us know through the little comment box below.
Disclosure: I don’t have any positions in any stocks mentioned herein, and no plans to initiate any in the near future as well.