Update American Tower (AMT)

06/06/2011 6:06 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Two completely unrelated, as far as I can tell, pieces of news from American Tower (AMT) last week. (American Tower is a member of my Jubak’s Picks portfolio http://jubakpicks.com/ )

On June 3, the company announced that it had filed Form S-4 with the Securities and Exchange Commission (SEC) as part of the company’s proposed conversion to a real estate investment trust (REIT). The company’s board approved the plan back in May with the conversion, if approved, to take place no earlier than January 1, 2012. I think this move makes sense for the cell phone tower operator and owner. The company’s business is all about generating cash flow from its construction and then leasing of cell phone towers to cell phone service providers. A REIT structure would allow the company to pass through more cash to investors as dividends while not paying taxes on those earnings at the corporate level.

On June 2, American Tower disclosed that it had received a subpoena from the SEC requesting documents from 2007 through the present that are related to the company’s tax accounting and reporting. The company has said that it would comply fully with the request. Barclays Capital is out today, June 6, with an opinion that the SEC subpoena isn’t likely to be material to the company’s earnings. The market doesn’t seem to be fully convinced. Shares are up 1.6% but that only recovers part of the stock’s loss on the subpoena announcement. The shares are still down 4.3% from the June 2 close.

Subpoenas are never a good thing for a stock, but in the likely event that this isn’t material, the stigma hanging over the stock might be giving investors a good entry point. As of June 6 I’m keeping my target price for these shares at $64 by April 2012.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did not own shares of American Tower as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/


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