I’m not sure if you noticed yesterday, but I was pretty annoyed.
That New York Times article – “In South Carolina, a Once Thriving Textile Hub Is Baffled by Trump’s Tariffs” – used my hometown to paint a grossly incomplete and misleading picture: that Trump’s policies mean Spartanburg’s BMW plant will be shut down and the local economy will crumble.
Nothing could be further from the truth.
The New York Times seems to think that BMW decided to come in and change Spartanburg out of nowhere. It was out of the goodness and kindness of its business heart – or at least because there were no tariffs to contend with.
That’s the message you’re supposed to accept. But the reality, which I experienced firsthand, is very, very different.
You see, locals like me had to give up some of our hard-earned cash every month in order to lobby the German car company. It needed proper incentives before it would commit so much time, money, and effort to the area.
That’s precisely what President Trump is doing with the tariffs today: He’s incentivizing companies to bring their business to the U.S. Maybe it’s more with sticks than carrots, but the end result is the same…
Global companies are committing enormous amounts of money to invest in the U.S.
That growing number now includes Nvidia (NVDA), which already has a chip plant in Phoenix, Arizona. But it’s now commissioning two more manufacturing facilities in Texas.
Fellow chipmaker Advanced Micro Devices (AMD) will also be opening a facility in Arizona. That news just came out yesterday.
Pharmaceutical company Merck (MRK), meanwhile, recently announced plans to build a $1 billion plant in North Carolina. London-based spirits maker Diageo (DEO) will invest in South Carolina. Spain-based Saica Group, a corrugated packaging maker, will be breaking ground in Indiana.
And the list goes on…
Mostly in southern states, which are rich in history, culture, and, increasingly, investment opportunity.
The South Isn’t Looking So Dirty These Days
I’m a Southern boy, born and raised here in South Carolina. So I admit I have a bias when it comes to my favorite parts of the U.S.
But when it comes to 21st-century business climates, you just can’t beat the southern swath of the U.S., known as the Sun Belt.
It’s a region that includes South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana, Texas, New Mexico, and Arizona. Most of North Carolina and Tennessee also qualify. And the same goes for two-thirds of California, along with smaller portions of Nevada, Utah, Colorado, Kansas, Oklahoma, and Arkansas.
Real estate firm Clarion Partners describes the Sun Belt as featuring:
… lower taxes, housing, and pleasant weather. Overall, the region offers either low or no corporate, individual, or property taxes, unlike many non-Sunbelt states further North, where the burden is increasingly onerous to many businesses and households.
The politics down south are much more business-friendly as well. That’s why so many American companies moved their headquarters during the lockdown years. New York and California suffered especially during that time.
Now Delaware is, too. As I wrote in February, it lost “business at a dramatic pace” after “a judge there overruled Tesla (TSLA) shareholders’ vote to give Elon Musk a sizable compensation package.”
That prompted a slew of powerful companies to consider moving – or to actually do it. And they mostly moved down South.
An easy snapshot of this new migration can be seen in forecasts for apportionment in the House of Representatives. Remember, the number of representatives a state gets in the House is determined by population. The more people in your state, the more representatives that state gets.
And with that in mind, this chart from the American Redistricting Project gives us a good look at where people are going.
Florida and Texas look to be the biggest beneficiaries of this southern migration. California, New York, and many of the northern states are losing out. The U.S. Census Bureau also tells us that from April 2020 to July 2024:
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South Carolina added 360,000 new residents, a 7% increase,
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Just over 600,000 people became North Carolinians, a 5.7% increase,
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An additional 315,000 people now call Tennessee home, a 4.5% increase,
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And some 467,000 people moved to Georgia, a 4.3% increase.
The data is pretty clear. The Sun Belt and the American South are where many people and businesses are choosing to put down roots.
Own a Stake in the Sun Belt
As my regular readers know, I used to be a real estate developer. For decades, I built for and rented space to dozens of companies in the Carolinas, Georgia, and Alabama.
So, while there’s plenty of room to invest in the South, my mind automatically goes toward real estate. It’s one of the easiest, most efficient ways to capitalize on the Sun Belt boom.
Over the last decade or so, my hometown area – which includes Spartanburg and Greenville, South Carolina – has exploded. The population is rising, businesses are growing, and economic opportunities abound.
It’s therefore no surprise that many real estate investment trusts (“REITs”) have decided to get their piece of the pie.
Take STAG Industrial (STAG), a warehouse REIT with a portfolio of 591 properties across 41 states. A few years ago, it began focusing on the Greenville-Spartanburg area, recognizing its economic vitality.
It has since accumulated around 10 properties. So far.
As of the fourth quarter of 2024, STAG’s portfolio was 96.5% leased. And I like its diversified tenant list, where no single company accounts for more than 2.9% of STAG’s total annualized rent.
Shares are attractive today, trading at 16 times their price to funds from operations (P/FFO) compared with a norm of 17 times. Plus, it sports a well-covered dividend yield of 4.6%.
Analysts are forecasting growth of 5% this year and 7% in 2026. And Wide Moat Research’s annualized total return target is 20%.
Another Sun Belt favorite is Mid-America Apartment Communities (MAA), a Nashville-based multifamily landlord with over 105,000 apartment units. Its primary focus is on the South, where its properties capture the benefits of high growth and demand.
Mid-America owns 10 communities in the Greenville-Spartanburg area in addition to higher concentrations in Atlanta, Charlotte, Charleston, Dallas, Orlando, Austin, and Raleigh-Durham.
Mid-America is trading at fair value today, with a P/FFO multiple of 19.6 times and a dividend yield of 3.9%. Our annualized total return target is 12%.
Then there’s Public Storage (PSA) with its 3,300 facilities across the U.S. It’s not overly concentrated in my hometown – yet – but it is expanding its footprint with several new projects under construction.
Shares are trading at 19.1 times P/FFO, a discount to its average 22 times multiple. Its 4.2% dividend yield is well-covered, and we’re targeting 20% annualized returns.
These three plays offer a solid combination of value and growth. Their steady dividends should keep you reassured during these turbulent times. And their long-term expansion prospects continue to rise with a healthy dose of southern sunshine.
Regards,
Brad Thomas
Editor, Wide Moat Daily
P.S. Make sure you watch my YouTube show this week where Nick Ward and I will discuss REITs versus rentals.
MAILBAG
Do you agree with Brad that the Sun Belt is a good place to look for investments? Write us at feedback@widemoatresearch.com.