Cold Storage Is Heating Up!

Hey Influence Traders,

The Biden administration got aggressive last night!

Spending, spending and *checks note* more spending!

And a big tax bill to boot!

While nothing is set in stone … the direction this administration wants to go is clear.

Tax …

Income taxes are going up for folks making over $400k per year.

The top rate will go to 39.6% from 37%.

Capital gains taxes are also going up – almost doubling for those making over $1 million.

The top capital gains rate will go to 39.6% for those earning $1 million or more.

Some states will see combined federal and state capital gains taxes of more than 55%.

This will not only impact wealthy tax-payers on their yearly tax bills, but will cause them to owe significant amounts when they sell stocks or businesses.

The step-up basis benefit on inherited assets is also on the chopping block — and will impact the taxation of appreciated assets.

Repealing the step-up in basis provision would end a tax break that wipes away the capital gains on an asset when it is inherited. Currently, much of the appreciation on securities, properties and small businesses goes untaxed when the original owner dies.

Step-up in basis allows heirs to use the market value of assets at the time of inheritance rather than the actual purchase price as the cost basis for capital gains.

Spend …

The taxes will be used to pay for Biden’s “American Families Plan.”

The $1.8 trillion proposal will fund paid leave, childcare, and education programs.

The primary beneficiaries will be daycares, pre-k schools, and community colleges.

And the IRS will get an $80 billion bump in its enforcement budget to go after tax “cheats.”

The administration believes that this “investment” into the IRS will generate $700 billion in “revenue” over the next decade.

What Else?

Biden appealed for more people to get vaccinated.

He wants the entire country to get a shot in the arm.

But vaccinations have stalled.

Some folks are pushing back … they’re not buying it.

People ARE buying and storing food … which sparked an interesting trade thought.

Changing Behavior

From toilet paper to frozen meals, Americans became hoarders during the pandemic.

Freezers, in particular, became stocked with food staples (and ice cream, at least in my house).

People ate at home more — restaurants were largely closed, after all — and that required stocking additional supplies. And the increase in frozen product demand put stress on supply chains.

That trend does not seem to be slowing down even as the pandemic gets long in the tooth.

        • 57% of people in a recent survey said they are limiting the amount of time spent in stores.
        • 36% said they were still stockpiling groceries or household supplies.
        • 33% said they were buying more frozen goods than in past years.

Cold Storage

Getting enough frozen products to local store shelves and into homes requires regional cold storage facilities.

Those have been in short supply because they tend to be more expensive to build and run than traditional warehouses. (Just consider the mysteries of a mere refrigerator.)

But some companies are committing to the sector.

Americold Realty Trust (Ticker: COLD), a logistics company focused on the cold storage supply chain, is committed to growing in the cold storage space.

COLD grew its year-over-year revenue by 11.4% in 2020. 

They also acquired Agro Merchants Group for $1.74 billion — which added 46 facilities to their portfolio.

As for the stock, it has been heating up of late and closed yesterday at $38.85 up from it’s 2021 low of $33.90 in March.

COLD wants to meet the demand for cold storage at the last stage of distribution – where people live.

Building and running cold storage facilities is a specialized industry compared to conventional warehouse operations, which is why operators can charge premiums over non-refrigerated storage.

COLD is not without risk – building and running cold storage facilities is more expensive than traditional warehouses and rededicating them is inefficient. 

Moreover, in this fast paced world, sentiments can quickly shift. Will people go back to eating out or will the trend of in-home dining and hoarding continue?

The polls say the trend is growing and here to stay.

If you believe that, COLD is positioned to meet this growing trend.

Cutting Through the Noise for You,

Frank

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