I’ll be frank … I don’t know when this market sell-off ends.
But I do know that I want to position my portfolio in stocks that can survive another leg down while also preparing to benefit from the next bull market.
I want to minimize the damage and then get rewarded for my patience when the good times return.
It looks like American Tower Corp. (NYSE: AMT), a leading real estate investment trust (REIT) in mobile infrastructure, fits that bill.
American Tower: A 5G REIT With Low Volatility
AMT owns a sprawling network of cellular towers.
It also pays a respectable 2.4% dividend that grows every quarter. The REIT has raised its dividend every quarter since the beginning of 2012. That’s four payout raises per year for a decade now!
American Tower Corp.’s Stock Power Rating on May 17, 2022.
That’s the literal definition of average (or “Neutral,” going by our terms). But as we dig a little deeper into the details, you’ll see why I’m fine with that!
AMT’s Stock Power Ratings
Growth — American Tower has a stodgy, boring business model. There’s nothing exciting about renting cell towers to mobile operators. But it’s still a critical business today that’s growing like a weed.
AMT rates a 95 out of 100 on our growth factor. Now, I can’t tell you with any degree of accuracy what the next big social media app will be. But I can tell you that 5G’s rollout is critical for autonomous driving, artificial intelligence (AI) and a host of other emerging mega trends.
AMT’s infrastructure is part of that rollout, and it presents a low-risk way for us to play it.
Volatility — I’m throwing around the word “boring” a lot. That’s because I want my income plays to be boring. I don’t want this part of my portfolio giving me drama or headaches. I don’t want to watch my income stocks and trade them aggressively. I want to ignore them and let them send me a dividend check each quarter.
AMT fits the bill here. It rates an 85 on our volatility factor, meaning it’s less volatile than 85% of stocks we rate.
Quality — American Tower also rates a solid 65 on our quality factor, which is based on profitability and balance sheet strength. This is impressive, given that REITs have lower reported profitability due to high non-cash expenses like depreciation. They also tend to have high debt levels, as most real estate is mortgaged.
Despite this, when we drill down even further, AMT rates an excellent 81 on our composite “return on” subfactor, which aggregates returns on equity, assets and investment over various time frames. It also rates an impressive 88 on our cash flows subfactor and a 90 on our margins subfactor.
Momentum — AMT rates a “Neutral” 48 on our momentum factor. This means that AMT’s momentum is in line with that of the broader market. I’d prefer this to be higher. But given AMT’s high scores in growth, volatility and quality, I’ll accept an average rating here.
Value — American Tower is way down from its recent highs. It was trading at over $300 per share as recently as August of last year and now trades for around $230 per share.
Yet despite this drop, the shares aren’t “cheap,” objectively speaking. AMT rates a 5 out of 100 on our value factor. Part of this is due to REITs being penalized here, as their low GAAP earnings make them look expensive.
But the company’s high growth and quality ratings play a role here too. The stock is expensive because investors value its growth prospects.
Size — And finally, we get to size. AMT rates a 5 on size. That’s OK. This is a $105 billion REIT, and its large size contributes to its strong volatility score. I’m willing to accept that trade-off.
Bottom line: American Tower is a solid growth 5G REIT backed by durable mega trends that should last years, if not decades.
However or whenever this bear market finally ends, AMT should be in the pole position to excel in the next bull market to follow.
To safe profits,
Charles Sizemore, Co-Editor, Green Zone Fortunes
Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.