Digital Realty (NYSE:DLR) is a core position in my Durable income Portfolio and I have been pleased with the performance since I initially established a position in September 2013. As a value investor, I'm always looking to own securities that offer structural advantages – or wide moats – that can fend off the competition and earn high returns on capital.

Almost two years ago, one of Digital's adversary hedge funds decided to launch a short thesis aimed at some of the data center REIT's moat-worthy characteristics, citing the fact that the barriers to entry were weakening and that Digital's business model was going the way of the dinosaur. The argument centered on the notion that Digital was no longer a sustainable business and that the decade-long earnings record was short-lived.

Although I have respect for many hedge fund operators, I was in complete disagreement with the rocks being thrown at Digital's fortress, and I decided to defend the castle by tripling down on my position (so on December 3, 2013, I took a sizeable position in DLR).

As you can see, the bet paid off, and one the primary reasons that I felt convicted to increase my position in Digital was because I recognized the value of the fortress brand. There is no doubt that highly profitable businesses are magnets that attract competitors making it difficult to generate strong growth; however, I recognized that Digital was prepared to withstand the onslaught while continuing to generate wealth compounding.

Digital Realty: Staying True To The Fortress Brand

Recently, Digital Realty announced it was acquiring Telx, a leading national provider of colocation and interconnection data center solutions for $1.9 billion. According to Digital's CEO, Bill Stein,

…we believe Telx fits squarely within the box in terms of our strategic priorities, and that is product offerings and geographic footprint are highly complementary to our current portfolio.