Rackspace Hosting is the big winner on Wall Street for the third quarter of 2012, and sits atop our Data Center Investor performance chart with a three-month gain of 50 percent. The San Antonio company was the chief beneficiary from a trend in which investors are seeking ways to benefit from the growth of cloud computing, a field in which Rackspace represents the best "pure play" investment.
The largest player in cloud computing is Amazon, but its stock performance is driven primarily by its retail business (AMZN doesn't even break out financials or performance metrics for its widely-used cloud computing platform, Amazon Web Services. Google (GOOG) and Microsoft (MSFT) also have cloud computing platforms, but experience a similar diffusion of businesses that drive their share prices.
Cloud-focused investors have also noted the importance of network capacity and interconnections to the growth of cloud services, a trend that has boosted interest in shares of two leading players in the interconnection business, Equinix (EQIX) and Interxion (INXN). Shares of Equinix have also gained on anticipation of its plans to convert to a real estate investment trust (REIT), a move that would involve a significant special dividend to shareholders.
Here's a look at the third-quarter chart:
The data center/cloud sector fared well compared to the broader market indices. For the quarter, the Dow Jones Industrial Average gained 4.3 percent, while the S&P 500 rose 5.8 percent and the tech-centric NASDAQ index was up 6.2 percent.
It was a down quarter for several of the data center REITs, apparently as investors took profits after a long upward move. These shares have gained more visibility as analysts and stock bloggers have noted their strong performance relative to REITs in other asset classes.
Now here's a look at the sector's year-to-date performance for 2012:
For the year thus far, the big winner is Equinix, which has more than doubled in price amid growing awareness of the company's role in enabling cloud connectivity, aswell as ongoing interest in its planned REIT conversion. Interxion and Rackspace are also near the top of the leaderboard, while CoreSite Realty (COR) has easily been the strongest performer of the year among the existing data center REITs, with its shares gaining 51 percent thus far in 2012.
For the year-to-date, the Dow is 9.98 percent higher, the S&P is up 14.6 percent and the NASDAQ Composite has risen 19.6 percent.
For the fourth quarter, investors in the sector will be focused on the expected IPO of CyrusOne, the colocation business of Cincinnati Bell, which is being spun off as a REIT.
