“What you don’t know about Steve Jobs’ final vendetta …” (Motley Fool)

Dave Gardner's teaser pick, now also teased as "The only thing Siri isn't telling you"

By Travis Johnson, Stock Gumshoe, January 11, 2012

The folks at the Motley Fool have run lots of ads for stock picks that “piggyback” on the iPhone’s gargantuan success — as have lots of other newsletter publishers, of course — and it looks like that trend will continue.

The ad I’ve seen today takes a somewhat different tack on this same basic idea — telling us that “Steve Jobs’ final vendetta” is the key to the future for one particular secret stock pick. So what is it?

Well, the vendetta part is probably something you’ve heard of — it was widely covered when Jobs’ biography came out around the time of his passing, and it’s basically that Steve was pissed that some key parts of Android had been “stolen” from iPhone.

But the take on it for the Motley Fool folks is that not only is their secret company profiting from the huge growth of iPhone … but that the iPhone, far from being the global leader, is desperately growing in an attempt to catch up with Android.

Which is basically a way of setting the stage for a huge competition — and the competition will drive down prices for smart phones, which means more and more people around the world will buy them, which means cell phone traffic will skyrocket, which means the networks will get clogged, which means they’ll need more cell towers and more antennas to handle the additional bandwidth required from all of these data-heavy devices.

Which means, yes, David Gardner and the Rule Breakers folks are apparently again re-picking American Tower (AMT), the dominant US cell phone tower owner and developer.

And though AMT looks awfully expensive by most conventional metrics — trailing PE of 90, priced at 10X sales, 7X book value — it’s hard to blame them for their enthusiasm. After all, AMT was pretty expensive when they started teasing it almost two years ago, too, and it’s up about 50% since then.

American Tower is still churning along on more or less the same path as when I wrote about them in May of 2010 — expensive, but roughly similar valuation … the forward estimate for earnings now gives them an estimated PE of about 42 on the next year’s earnings, compared to a forward PE of about 38 when I last wrote about them (the stock has moved from the low-$40s to the low-$60s in that time).

And the big change in the interim? AMT finally decided to do what many folks thought they should have done all along: They converted to a REIT (Real Estate Investment Trust) on December 31, so from here on out they’ll be a tax-advantaged pass-through company.

According to this article from the Motley Fool, they’re going to be a lousy yielder as a REIT — with an expected dividend of 80-90 cents per year that would give them a yield of less than 1.5%. Kind of hard for me to get real excited about, but it is high compared to their tower-owning peers. There are some limitations on how REITs can fund growth by reinvesting earnings, but I don’t know whether those limitations would really cut into AMT’s flexibility as they try to continue to grow their network.

The folks at Investors Business Daily speculated that there might be some love for AMT from REIT investors that helps the share price continue to climb, in part because AMT has growth numbers that are substantially better than most traditional REITs, and that should mean that they can grow the dividend pretty quickly compared to traditional REITs … but that’s a pretty low base to grow from.

Personally, I’m more of a fan of the also-nicely-growing data center REITs who benefit from the same basic tailwinds (more data, more traffic, more need for servers and server space), but which I think are priced more attractively — that group includes Digital Realty Trust (DLR) and CoreSite (COR), the latter of which I profiled for the Irregulars quite a long time ago and still prefer (I don’t own either — nor, for disclosure’s sake, do I own AMT. I do own Apple and Google shares, just FYI).

That’s not to say there’s anything wrong with American Tower, it has a unique market position and strong growth, along probably with very good dividend growth going forward… and probably a [small] part of the reason for their relatively high PE is the cost of REIT conversion. It’s just that I like a little more current yield with my REITs, and from my perspective it’s hard to build excitement in a REIT that starts out being this expensive.


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10 Comments on "“What you don’t know about Steve Jobs’ final vendetta …” (Motley Fool)"

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minifesto
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minifesto
January 11, 2012 4:49 pm

I think Steve Jobs was again seeing the future with Android the biggest threat to Apple. A Google/Intel combination vs AAPL what a lovely fight for the consumer. Long INTC. An iMAC and iPAD lover 200+ apps. Next buy an Ultrabook so I can use my Windows applications not transfered to MAC.

sagacious
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sagacious
January 11, 2012 9:11 pm

I think you hit the nail on the head–you don’t really know if their restructuring as a REIT will affect their bottom line as a growth stock. And why invest in a REIT paying a paltry 1.5% when you can invest in AGNC paying 19% or NLY paying 15%? I wouldn’t take the risk of becoming a Motley fool by investing in this one.

whitecremedecacao
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whitecremedecacao
January 12, 2012 10:36 pm

Jobs declaring war on Android has nothing to do with the outcome for AMT.
The fact that MF implies that it does, is BS.

Adevarul
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Adevarul
March 11, 2012 10:58 pm

Jobs is now dust and good riddance to the arrogant overbearing arse. He may have been visionary but what a dou che. Here is what Jobs was so furious about:
He was such a control freak that as Google & Android began to dominate the market, Jobs saw a repeat for Apple of Apple vs. Windows.

Truth spoken here.

Afamiii
Guest
0
May 10, 2012 8:15 am

Adevarul makes a good point (at least the second part of his post.) Fact is that Apple is likely to again lose the war. If I’ve learnt anything from the tech wars of the past three decades (GSM vs. CDMA; Beta vs. VHS; Compact Casette vs. Cartridge; SD vs. memory stick, Apple vs. Microsoft; ) is that victory tends to go the more open and inclusive technology.

Lynn Cee
Guest
0
June 25, 2012 8:40 am

Let’s not be irrational. Ultimately and alas, you’re dead — you lose. Even sadder, Steve Jobs was famous for swiping the ideas and work of others. Anyone hell-bent on revenge to their dying breath is a sad case; you know: sound mind, sound body. … And, the latest chapter: Steve Jobs’ “storybook” home in Old Palo Alto (corner of Santa Rita and Waverley) is already under big construction/renovation (6/23/12). Forget Google, maybe the house was haunted.

advantedges
Member
56
advantedges
August 10, 2012 5:47 pm
They keep marketing this story on Jobs through the Mötley Fool. If the hype they keep repeating is indeed about AMT, then we should all be disappointed with the Fools, Jobs and Travis. What a waste of time. Sure, AMT might be a good stock, but it is already had a move from @48 to 70 plus over the past 12 months. This is not a new pick, since it was hyped in December, 2011, and last year. A good pick back then. Why continue to hype it? Because a lot of money was spent by the Fools to market… Read more »
advantedges
Member
56
advantedges
August 10, 2012 5:49 pm

PS. Apology to Travis…..your review was in January. Why are the Fools hyping AMT again?

advantedges
Member
56
advantedges
August 10, 2012 6:03 pm

BTW….AMT Q2 earnings fell by 58% while reporting a profit of $48.2 million, or 12 cents a share, down from $115.2 million or 29 cents a share, a year earlier…….be sure to do your own due diligence!

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