Stock of the week: American Tower (AMT)

by Oct 16, 2020Market Reviews

Stock of the week: American Tower (AMT)

Sometimes, the most boring companies are the best investments. I’ll give a couple of examples.

Waste Management Inc (WM)  

Evident by the name, Waste Management deals with the management… of waste. Over the past five years, they have returned over 120%. For reference, Facebook, a notorious growth stock, has returned around 170% in the same period.

Dominos Pizza (DPZ)

Known for their quick delivery and low prices, Dominos Pizza has been a staple in many countries (except Italy) as an alternative to your McDonalds and Subway. The stock has returned over 280% in the past five years.

However, the stock we’re talking about today is American Tower (AMT). Their primary business is the leasing of space of communication sites to wireless service and data providers, radio and television broadcast companies. Essentially, the 5G towers you see on plots of land – they own that and lease it to companies, such as AT&T, Verizon, Vodafone, etc.

American Tower is not exactly a stock – it’s called a Real Estate Investment Trust (or REITs, for short).

 

American Tower: Catalysts

With Coronavirus hampering stock prices across the world, interest has been put on business who can survive during the world’s various potential lockdowns. Much attention has been put on “work from home” stocks such as tech and delivery services such as Uber eats, Amazon, etc. However, not much love has been shown to stocks like American Tower. With customers such as AT&T, Verizon, and T-Mobile entering into long-term leases, the Trusts’ revenue base is not going anywhere anytime soon. Furthermore, these companies rely on American Tower to run their businesses – so their stickiness is an advantage during this period. Their business spans a lot of Asia, Europe, the Middle East, Africa, and Latin America with high operating margins.

Furthermore, they are perfectly positioned to take advantage of the 5G boom, possibly spurred by the new iPhones Apple release.

 

American Tower: Risks

In terms of their business, not much. They face little competitors to the point they kind of co-exist with each other. However, their stock is quite expensive, trading around 55 times, pushing its dividend yield down to around 1.9%.

 

American Tower: Conclusion

American Tower is a good stock (REIT) to own if you’re looking for a stable business at any point in an economy. I believe the intrinsic value of the leases has not gone down because of the Coronavirus. Not only that, with low-interest rates. AT&T will be more willing to take out more debt to invest in 5G, alongside US senators proposing around $1B USD in funding for 5G. Although the business is quite expensive stock wise, they’ve currently dropped from their all-time highs, making it a compelling buy.

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