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More "Valuation is for Sissies": American Tower (AMT)

June 11, 2010 | About:
Saj Karsan

Trader Mark

4 followers
As I wrote earlier in the week I am trying to build a wing of the portfolio for companies with insane valuations that people just buy hand over fist on every rally because... well, they go up. Another name I looked closely at was American Tower (AMT) - this is a hedge fund favorite. Simplebusiness description - all the towers needed for mobile communication.

American Tower Corporation, through its subsidiaries, operates as a wireless and broadcast communications infrastructure company. It develops, owns, and operates communications sites. The company operates in two segments, Rental and Management, and Network DevelopmentServices. The Rental and Management segment leases space on its wireless communications towers to customers, including personal communications services, cellular, specialized mobile radio, WiMAX, paging, and fixed microwave. The Network Development Services segment provides tower-related services, such as site acquisition, zoning and permitting services, and structural analysis services. As of March 1, 2010, the company owned and operated approximately 27,000 communications sites in the United States, Mexico, Brazil, and India.

Rather than just buying as the chart turned positive when the stock broke over all key resistance areas late last week I made the mistake of checking out its EPS estimates. The stock was around $42 ... in return I get $0.87 EPS for 2010, aka a forward PE of just under 50 for acompany growing about 20%. Not a 1 PEG (PE to Growth ratio), and not a 2 PEG, but a cool 2.5...

But who cares? The stock goes up... and that's all that seems to matter to the computers. I suppose if you are paying 50x forward, there is no shame in paying 80x and then 150x. This is 1999 logic. A missed opportunity as the stock has gone off to the races today.



No position

Trader Mark

http://www.fundmymutualfund.com/
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About the author:

Trader Mark
Saj Karsan founded an investment and research firm that is based on the principles of value investing. He has an MBA from the Richard Ivey School of Business, and an undergraduate engineering degree from McGill University.

Rating: 2.0/5 (3 votes)

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