In one of my very first interviews ever with Jim Cramer for TheStreet.com TV, I asked him to name a favorite hedge fund to follow. He offered Atticus Capital.
Since then I have basically been obsessed with Atticus' portfolio, in hopes of piggybacking off the firm's great stock-investment research. Take for example its largest holding,
Freeport-McMoRan Copper & Gold
, shares of which doubled last year.
Atticus tends to focus on value-oriented companies with improving fundamentals, both domestically and internationally. In short, they are stock pickers -- and I love that!
However, over the past few months, Atticus has been loading up the boat on
Crown Castle International
. Unlike other Atticus positions, Crown Castle seems like a boring company that deploys and operates shared wireless infrastructure and network towers. With an unimpressive balance sheet and no real catalysts in the future, I didn't know what to think.
So, when the firm disclosed that it had bought roughly 5 million shares last quarter, making it Atticus' eighth largest position, that got me and my research team seriously thinking. It now owns some 13.5 million shares.
Crown Castle owns and operates various wireless towers in the U.S. Currently, the wireless industry is seeing a massive shift from voice transmissions to data transmissions. Voice growth is flat to down for the year, while data is growing exponentially.
Some 15% of all wireless stations are based in the U.S. and most, if not all, need to be able to handle increases in data flow. In general, most investors do not associate the overall U.S. market with growth, but in the wireless business they should. Despite, the extremely high level of growth in data transmissions, the U.S. market is relatively underpenetrated compared to certain European and other developed markets.
About 75% of Crown Castle's towers have the highest daily rates in the industry, beating out by far competitors
Crown Castle is also in the process of buying back a lot of stock, which should help boost earnings per share. Clearly, management believes in the future of the business as they have invested 3.1 times of the company's recurring cash flow to fund these stock buybacks.
The company is also well-positioned to capture future value from leasing. About 4.3% of new leasing revenue is incremental return on equity capital, compared to 2.6% and 3.1% from AMT and SBA. Companies like
will obviously sign longer-term lease contracts with companies whose towers are properly equipped; Crown Castle is poised to capture both of these markets.
With tower rental revenue up from $189 million in the fourth quarter of 2004 to $322 million in the second quarter of 2007 and tower rental gross margins up from $126 million to $210 million in the same timeframe, the company is clearly growing.
With improving fundamentals, possible expansion into other end markets and a management team that plans on growing recurring cash flow by 20%-25%, Crown Castle could soon be the type of stock everyone wants to own.
To see all the firm's holdings, including
, check out the
At the time of publication, Altucher had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of
LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.