Stock of the week: American Tower (AMT)
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.
Who else feels like this year has gone by so quickly? Each week ahead article, I have been talking about how the election is coming and how volatile times are coming ahead. Now we are neck deep into election season, with the first one in New Zealand granting Jacinda Ardern and her party a landslide victory, enabling them to govern themselves. All eyes now are on the Presidential Election in the United States and the Brexit outcome between the UK and the EU. Here is your week ahead.
The Pound against the US Dollar is currently one of the most exciting pairs to be keeping an eye on, as it is essentially fighting between a rock and a hard place. Currently ranging just under 1.30, both nations have events coming up that will significantly shift the currency pair in either direction.
Coronavirus. Vaccine? Biden. Next President? Brexit. Done in our lifetime? With a lot of uncertainty and volatility in the markets, what party do the markets want?
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