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American Tower earnings up as shares decline

Also: GAMCO Westwood Equity Fund's emphasis on quality may make it lag behind the market.

August 14, 2011|By Andrew Leckey

Question: I would appreciate some word about the stock of American Tower Corp. — B.L.

Answer: Growth of this profitable cell tower operator seems assured because of the rising global demand for high-speed data and on-demand video services.

Major customers of its wireless and broadcast communication sites are wireless carriers compelled to upgrade networks to keep up with their competition.

American Tower has more than 37,000 global tower sites. Recent reported deals involve Ghana, South Africa and Colombia, nations with relatively low wireless penetration and considerable potential.

American Tower shares recently had been down 8% this year. Second-quarter earnings were up 16% as Verizon and AT&T continued to invest in their wireless networks by adding equipment and increasing site density.

Separately, American Tower received an SEC subpoena in June for tax-reporting and accounting documents from 2007 through the present.

The consensus analyst recommendation on the volatile shares of American Tower is "buy," according to Thomson Reuters, consisting of seven "strong buys," 13 "buys" and two "holds."

American Tower has the industry's longest contracts, strong cash flow and an aggressive stock-buyback program. Nonetheless, it is susceptible to reduced business from consolidation, shifts in wireless demand and inherent overseas risks.

Question: What do you think of my shares of GAMCO Westwood Equity Fund? I've been disappointed. — P.G.

Answer: Its emphasis on quality means it lags when the market is led by the stocks of weaker firms carrying more debt.

Susan Byrne, who has managed the fund since 1987, prefers cash-rich, stable, well-entrenched companies whose prospects haven't been fully realized by Wall Street. She typically holds a concentrated portfolio of around 50 large-cap stocks and is willing to make sector bets.

The $116-million GAMCO Westwood Equity Fund "A" had been up 3% over a recent 12-month period to rank in the lowest quarter of large growth-and-value funds. Its three-year annualized decline of 5% placed it in the bottom tenth of its peers.

"This fund can serve as a core holding, but investors have to understand it doesn't buy companies that are over-leveraged," said Andrew Gogerty, mutual fund analyst with Morningstar Inc.

Eight industry analysts assist Byrne, founder and chief investment officer of Westwood Management Corp. Their stock picks often feature global revenue streams, attractive dividends and growth prospects. The fund's 15-year annualized return of 6% recently ranked just outside the top one-fourth of its category.

Financial services represented about 20% of GAMCO Westwood Equity, with other concentrations in healthcare, industrial materials and energy. Top stock holdings recently included MetLife Inc., Pfizer Inc., JPMorgan Chase & Co., AT&T Inc., Wells Fargo Co., Johnson & Johnson and Walt Disney Co. This 4% "load" (sales charge) fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.79%.

Byrne also manages the WHG Large Cap Value Fund, which is the same fund as GAMCO Westwood Equity but with a lower expense ratio, Gogerty noted. That 5% load fund, with an annual expense ratio of 1.25%, is a better bet for new investors, he believes.

Andrew Leckey answers questions only through the column. Write to him at yourmoney@tribune.com.

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