Dealmaker’s Diary: A 5G Stock That Towers Above the Rest

Alpesh Patel|September 5, 2024

Data, data everywhere.

All the ways we communicate and entertain ourselves with our devices requires a massive amount of data.

Good thing there’s a company like the one I’ve found for you this week.

It’s a wireless infrastructure company with 36,000 data towers across the U.S… and has a hand in the 5G rollout.

Plus… it is one of the top REITs by market capitalization.

But even better… it gets a passing grade on my proprietary GVI scoring system.. has low volatility… and is about 50% undervalued.

That’s right… the stock would need to double in order to be properly valued.

A cheap stock in a critical industry? Don’t miss the call on this one.

Get all the details on the company – including its ticker – in my latest video.

Click on the thumbnail below to watch.

 

TRANSCRIPT

Hello, everyone. Welcome to Dealmaker’s Diary and my Stock of the Week.

The stock I want to talk to you about today is in communications and data. Data, data everywhere.

The company is SBA Communications (SBAC).

It’s got 36,000 towers across America. The company’s in a strong position in the 5G rollout as well. Given the massive mobile data demand there is, this makes it very compelling, let alone the fact that it’s an S&P 500 company with a valuation of $23 billion.

Just imagine the amount of data going through our phones, our other wireless devices, the quality of videos we’re streaming, the quantity and quality of pictures that we’re taking, and the megabytes and the gigabytes that are being used.

All of that demands more and more data, and that’s where this company comes in. And that’s what makes the numbers attractive.

If you look at my GVI (growth-value-income) score, you have got a company with a score of 8 out of 10.

Now remember, anything on my proprietary algorithm with a 7, 8, 9, or 10 ticks the box.

Valuation is the most important factor that I look at… with the others being profitability relative to share price, then revenue growth, sales growth, profit growth, and then finally dividend yields.

So SBA ticks the box there.

With a forecast P/E of 23, you’re paying $23 for every one dollar of expected profits.

And whilst that’s not cheap, it’s not expensive either.

For CROCI, it’s in the top quartile by cash return on capital invested of all companies. Now, Goldman Sachs Wealth Management says that puts it in a basket of stocks likely to generate 30% per annum. There’s no guarantee of that, but 13.1 ticks my box again.

You see how valuable CROCI can be to your investing right here.

While Sortino and Return Alpha don’t tick my boxes, you’ll know that I tend to be a bit less stringent on my Dealmaker’s Diary than I would be on my GVI Investor. So I’m going to give those two numbers a bye as it were and just wave them through.

Volatility, I like as well. Very low volatility, and I like that in my old age.

So where are we on the graph?

It’s oversold. It’s almost dropped 50% in price over the last couple of years. That has knocked its valuation to “cheap.” And that means, technically, it’s oversold.

The monthly MACD is now rising, but there’s no guarantee it’ll go from $226 to $250 and then onward beyond other resistances at $270, $275, $300.

Certainly, that’s the direction of travel we are looking for it to make up the ground that it lost since 2022 until this year.

And if you look at the discount cash flow, it’s 45% undervalued, which means it would have to double in value in order to pretty much get to where it should be.

That would take you back to the $400s we were talking about. So, it fits in nicely with that assessment as well.

Thank you very much. I hope you enjoyed that, both an insight into how we look at things, but also the bigger world and what’s going on, what’s moving it.

I hope there wasn’t too much background noise. We’ve got a busy office. We’ve got some workmen outside on that side. We’ve got staff on this side. They’re the ones who pass me all of these documents. They’re the ones who do the hard work and then I narrow it down and drill down to the companies that I like and that I want to send to you.

And it goes straight from my desk to your room. Thank you very much.