Tuesday’s IBD 50 Stocks To Watch pick, REIT stock leader American Tower (AMT), broke out above a new buy point Monday and is in buy range. American Tower stock fell 0.3% Tuesday after trimming losses and is just above the buy point.
IBD 50 Stocks To Watch: American Tower
Boston-based American Tower owns cellular towers used by wireless service providers and TV and radio broadcast companies. According to the company, American Tower’s “global portfolio includes approximately 180,000 communications sites, including nearly 41,000 properties in the United States and approximately 139,000 properties internationally. “
Wells Fargo analyst Jennifer Fritzsche says that over 90% of American Tower’s revenue is recurring revenue from telecom contracts. AT&T (T), Verizon Communications (VZ) and T-Mobile U.S. (TMUS) are among the biggest U.S. customers of American Tower. In the post-coronavirus economic environment, investors are focusing on companies with stable earnings and recurring sales. American Tower is also a 5G wireless play.
In the most recent quarter — reported April 29 — funds from operations per share and sales grew 5% and 10%, respectively, according to IBD’s database.
The stock shows a 94 out of a best-possible 99 EPS Rating and a stellar A SMR Rating, according to IBD Stock Checkup. The Earnings Per Share Rating tracks a company’s earnings strength. The SMR Rating analyzes a company’s sales, margins and return on equity.
Industry Group’s No. 2-Ranked Stock
IBD Stock Checkup also shows that American Tower stock has a 94 out of a highest-possible 99 IBD Composite Rating, making it the No. 2-ranked stock in the property REIT industry. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors easily gauge a stock’s strengths.
It’s impressive that AMT stock is trading at new highs even though its group is more than 20% off a 52-week high. American Tower is clearly a leader in the industry.
The top-ranked stock in the group — with a best-possible 99 Composite Rating — is Power REIT (PW). The leading REIT hit a new high Monday and is about 68% above a 14.51 buy point in a cup with handle after a volatile breakout move.
REIT Stock Leader Shows New Buy Point
The newest buy point comes directly after a failed breakout above a 258.72 buy point in a cup base. Most of the new base formed above the 50- and 200-day moving averages, which gives the base solid support.
There are two potential flaws with the stock’s breakout. First, there was no surge in volume accompanying the breakout. On Monday, volume ended the session about 17% below average. Ideally, volume should increase at least 40% above average to indicate strong institutional demand.
Second, the stock’s relative strength line is still recovering from its sharp fall in mid-May. The RS line should hit a new high on the breakout day or shortly thereafter, so be on the lookout for the line to further improve.
The RS line measures a stock’s price performance vs. the general market. It is the blue line on every IBD daily and weekly chart.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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