According to Charlie Munger, in order to be successful in investing, investors just need to find a few great companies and hold on to them. Indeed, there were several stocks that kept appreciating for the last 10 years. One of them is American Tower Corp (NYSE:AMT) , a wireless and broadcast communications infrastructure company. Since 2003, American Tower has risen by more than 1,400%, from around $5 per share in 2003 to $77 per share. Should investors consider American Tower Corp (NYSE:AMT) a buy after its 10-year significant rise in its stock price? Let’s find out.
American Tower Corp (NYSE:AMT) is a leading independent owner and operator of more than 54,600 wireless and broadcast communication properties for lease to radio, television broadcast companies, and wireless data providers. The company operates in three main business segments: domestic rental and management, international rental and management, and network development services. The majority of the revenue, $1.94 billion or 67.8% of total revenue, was generated from the domestic rental and management segment. The second biggest revenue contributor was international rental and management, with $862.8 million in revenue in 2012.
Constant, predictable and growing cash flow
Since the beginning of 2012, American Tower Corp (NYSE:AMT) has been restructured to become a REIT. As a REIT, American Tower must distribute to its shareholders at least 90% of its taxable income. In 2012, the company distributed more than $355 million in regular cash distribution to shareholders. Over the past several years, American Tower Corp (NYSE:AMT)’s Adjusted Funds from Operations (AFFO) and AFFO per share have been growing consistently. AFFO increased from $642 million in 2007 to $1.2 billion in 2012, while the AFFO per share rose from $1.51 to $3 in the same period.
What makes me interested in the company is its business model that generates the growing and predictable stream of cash flow. Normally, the lease contract would last from five to ten years, with multiple five-year renewal terms. American Tower Corp (NYSE:AMT) reported that about 79% of its current lease would last for at least 5 years more. In 2012, AT&T Mobility was the largest tenant, accounting for 18% of its revenue. Sprint Nextel ranked second, accounting for 14% of total revenue, while Verizon Wireless and T-Mobile USA represented 11% and 8%, respectively.
Chuck Akre loves this stock
Chuck Akre, a famous investment manager, has been bullish about American Tower for several years. As of December 2012, he held nearly 1.7 million shares of the company, accounting for 9.3% of his total portfolio. What he likes about American Tower is the incremental returns on capital are “off the charts.” Over the years, the company has spent a part of its cash flow to acquire existing towers and build new ones. Then the balance of the cash flow would be used to pay off debt, and repurchase shares.