Investment Thesis

High unemployment rates and financial challenges among small businesses are two big problems that the markets are ignoring. Such problems may have negative impacts on the economy as a whole as small and medium enterprises (SMEs) make the majority of all businesses in America. PS Business Parks (PSB), which have a large tenant base of SMEs, is at risk as small business America struggles to recover. While PSB is an excellent company with desirable qualities, prices do not offer an adequate margin of safety. I rate shares a Hold.

The Elephant In The Room

Back in March, analysts and reporters were having a debate on which letter of the alphabet would illustrate recovery in the next few months or years: J, L, U, V, W, K? Economically speaking, we’re seeing more of an alphabetti spaghetti. E-commerce is having a J-recovery as people are smashing the “Buy now with 1-Click” button in Amazon (AMZN) than ever before. Airlines are having an L-shaped recovery with passenger traffic slowly increasing week-by-week. The entertainment and tourism industry is still in limbo and recovery should look like a U-shape once the vaccine arrives. Restaurants, on the other hand, may face the threat of a double-dip, W-shaped recovery if another lockdown were to happen. In short, we’re seeing disproportionate recovery across all sectors. All this is happening while the stock market is rallying to new all-time highs as if the pandemic did not really happen. So, equity market-wise, we’re looking at a V-shaped recovery… for now.

What is concerning is that the markets are ignoring the elephant in the room: sky-high unemployment rate. Yes, the number is improving from its high of 14.7% in April. However, weekly initial jobless claims have remained at about 800,000 for nearly two months, showing a significant deceleration in