Times of stock market volatility often bring on a round of capital rotations that many investors overlook, even though these can be among the most aggressive signals the market provides to the world about what the “smart money” wants to buy ahead of major global economic developments. In today’s uncertain environment, it appears that insiders have settled on the types of features they prefer for their portfolios moving forward.
This time around, the preference is set for both stable income (one that surpasses inflation rates and the benchmark bond yields) as well as relative stability in a business model and price action. Most investors would assume that these are mostly found in the real estate sector, and they would be right in doing so, leading them closer to where these insiders decided to buy.
As part of the real estate investment trust (REIT) universe, shares of American Tower Corp. (NYSE: AMT) appear to have been the prime candidate for this type of portfolio rotation, given its history of showcasing both income potential and price stability. Those who think it is too late to consider this stock after the big guys went in will be pleased to know it is far from the wrong time to add it to a watchlist.
Market Excitement Reaches a New High
Most outsiders (as opposed to the smart money) are still fixated on the exciting names that have dominated headlines and retail investment communities over the past 12 months, with a large share of them centered on artificial intelligence and semiconductor names.
Now comes a useful gauge for investors to consider when determining just how far the pendulum has swung. By looking at the relative performance between the iShares S&P 500 Value ETF (NYSEARCA: IVE) and the iShares S&P 500 Growth ETF (NYSEARCA: IVW), investors can see right away that value has come out of fashion during this period.
As with all cycles, it is inevitable that this overextension will eventually be corrected, leading to a mass shift toward value stocks and away from growth. These smart money buyers are getting well ahead of that future event by investing in American Tower stock.
What Makes American Tower Attractive?
As of the most recent quarter, where 13-F filings have been released, American Tower stock’s holdings reported up to $2.7 billion in institutional buying. Now, the question revolves around the factors that might have driven these buyers into this REIT, going deeper than just a potential rotation back into value.
For starters, American Tower stock has outperformed the broader S&P 500 index by as much as 21% over the past six months. This sort of momentum is typically at the top of the institutional buying checklist and is one factor to keep in mind when justifying this multi-billion-dollar position in the REIT.
More than that, this performance speaks to the underlying rotation back into value stocks that may be triggered in the coming months. However, this is all in the past now; investors need to look at the future, and who better to ask than the people who are paid to figure out the future of Wall Street?
Analysts from Bank of America were the latest to place a Buy rating on American Tower stock as of late May 2025, also assigning a valuation target of up to $255 per share. This view would imply that American Tower can rally by as much as 15.5% from where it trades today, not to mention make a new 52-week high as well.
Breaking a 52-week high is likely to attract significant momentum buying from institutions, prompting analysts to raise their price targets accordingly. Even if this rotation and upward momentum take a bit longer to be realized, American Tower stock still offers another benefit for shareholders in making up for their time.
Income Potential During Uncertainty
American Tower stock pays up to $6.80 per share in dividends, which at today’s prices would translate into an annualized dividend yield of 3.1%. This effectively beats the United States' inflation rate and competes with the 4.3% yield of the ten-year Treasury bond.
As the odds quickly stack in favor of buyers in American Tower stock, the bears decided that the juice isn’t worth the squeeze here, as investors can notice a 15.8% decline in short interest over the past month alone as a clear sign of bearish capitulation taking place.
Ultimately, this stable business model accommodating infrastructure and communications across the United States makes the stock immune to all of the geopolitical events bringing on S&P 500 volatility recently, which explains the buying ahead of a rotation and the reason why markets are willing to overpay a 56.9x price-to-earnings (P/E) ratio for the stock as well.
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