20+ % Correction Since June Offers Multi-Year Entry Point

American Tower (AMT) is one of the largest owners and operators of communication towers in the world. This REIT has a large asset base backed by physical assets and has been growing its dividends at an average rate of 20% per year. Many countries are now planning to upgrade their network infrastructures from 4G to 5G, potentially increasing connection speeds by a factor of 100. This tailwind is beneficial for American Tower's business, as wireless carriers and telecommunication companies will require even more communication towers as they build up their infrastructure requirements. The COVID-19 pandemic has also acted as a strong catalyst for the digitalization of businesses and driving up data downloads and usage, thereby increasing demand for connectivity and reduced lag times. The REIT is well-placed to grow over the long term, as lessees should continue to sign long-term leases to utilize its towers.

In early November, American Tower announced an agreement to acquire InSite Wireless Group for $3.5 billion. This acquisition will add a portfolio of around 3,000 communication sites in the U.S. and Canada to the company's portfolio and marks the REIT's first foray into Canada. American Tower was able to borrow at very cheap rates, with its 2024 notes having a coupon rate of just 0.6% and the 2028 Notes having a coupon rate of 1.5%. These low rates should allow the company to earn a very attractive return on these assets as demand rises globally for communication sites.

(Source: Earnings Call)

Management raised its AFFO/share guidance for FY2020 last quarter, reflecting 10.8% growth on a constant-currency basis. It's very likely that we're going to see continued growth of 8-10% over the foreseeable future. Furthermore, it has inked a 15-year lease deal with T-Mobile. The new deal will provide long-term revenue growth for American Tower while enhancing T-Mobile’s ability to provide 5G service.

(Source: Earnings Call)

Pull The Trigger On Bullish Options Strategies Now

Having lost the COVID premium, it's quite remarkable that the stock is down year-to-date. While many REITs are unattractive for options strategies and a low-volatility approach, American Tower has been great to long-term bullish buy-and-hold portfolios. Since December 2009, selling monthly at-the-money covered calls without rolling down the strikes during corrections would have compounded 20% with 9.5% standard deviation (excluding dividends). Buying stock would resulted in a 16.6% annualized return and 16.5% standard deviation. The latter approach would thus have been riskier with steeper drawdowns as well.

(Source: Option Generator Research)

(Source: Option Generator Research)

Utilizing a synthetic stock (selling a 30% ITM put & buying a 30% ITM call with 2 years to expiration) with monthly at-the-money covered calls (and rolling down during corrections to offset risk) would have yielded 22.1% per annum, while the risk-adjusted return is about 85% higher. Taking a bullish stance on long-term compounders with options yields incredibly strong returns. Choose your entry point, accumulate time value profits and stay the course.

(Source: Option Generator Research)