Summary
Mr. Market has driven down Iron Mountain's (IRM) share price. Bears focus on an elevated debt ratio and dividend payout.
After investing cap-ex, it takes time to see the results.
Q2 showed significant improvement, inline with management guidance.
End of year guidance suggests even larger gains as IRM starts seeing the benefit of their investments.
IRM has a legacy business with a huge moat and are expanding in a natural direction.
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Co-produced with Beyond Saving and Treading Softly
Introduction
One of the things we focus on to our investors is differentiating between short-term headwinds and long-term potential. Mr. Market is often fixated on the last quarter and next quarter, often assuming that the current conditions are going to continue in perpetuity.
This can cause share prices to drop (or rise) excessively, creating a buying (or selling) opportunity for investors that can maintain a more sober, long-term view.
The most common-sense rule of investing is "buy low, sell high". It is ironic that many investors will point to a chart and ask "Why buy this investment? It is down x% in this period." Then when an investment has ran up they will ask, "Why sell this investment? It is up x% in this period."
Since we are focused on finding higher than average dividends, we are often buying into investments at a point when others are "giving up"- having bought at much higher prices and are tired of seeing losses. Yet when it bounces back up, those investors are piling back into it, in fear of missing out.
On the other end, it is psychologically difficult to sell an investment that "has been good to me" and has made you a lot of money.
There is an inherent conflict between the common-sense "buy low, sell high" and our emotional instinct. It is not fun to see an investment dive into the red shortly after you invest or to see an investment continue climbing upward after you sold it.
This is where it is important to evaluate the fundamentals and determine if the share price is down due to long-term issues that permanently devalue the company, or whether the share price is down due to short-term headwinds that will eventually be resolved. We have to answer the all-important question, is the company worth less today, or is it on sale? Or is the company actually worth more today, or is it expensive?
