Warren Buffett made a big investment in Store Capital Monday, which led to a downgrade from a Wall Street investment bank.
Mizuho downgraded Store Capital from buy to neutral after the company announced that Warren Buffett had invested $US377 million in the company. After the announcement, shares soared about 11% to end Monday trading at $US23.11.
The ballooning stock price was the main reason for Mizuho’s downgrade.
“We think Berkshire’s investment validates STOR’s business model and alleviates concerns over n/t funding needs,” Mizuho’s Haendel St. Juste wrote. “However, after today’s +11% move, we think STOR is fairly valued and are downgrading the stock to Neutral.”
Mizuho thinks the company’s business model is solid. Store Capital invests in single-tenant real estate and receives “above average” yields on those investments, according to St. Juste.
Store Capital shares were down about 16.5% in 2017 before the Buffett investment. After Monday’s big run up, shares are still down 8.2% for the year.
St. Juste believes that Buffett’s investment will “provide a floor for the stock near-term.”
Shares of Store Capital are trading down 1.86% at $US22.68 on Tuesday.