Why Are Hedge Funds Bullish on SBA Communications Corporation (SBAC) Now?

We recently compiled a list of the 20 Most Profitable Stocks of the Last 20 Years. In this article, we are going to take a look at where SBA Communications Corporation (NASDAQ:SBAC) stands against the other profitable stocks.

The stock market has a long history of generating wealth for investors. While past performance doesn't guarantee future results, studying successful companies can provide valuable insights. By understanding the factors that drive these companies' growth, we can potentially make better investment decisions in the future. It's important to remember that investing involves risk, and conducting thorough research is crucial before making any investment decisions.

Investors frequently overlook revenue in favor of profitability when evaluating stocks. Profit is what's left over after all costs are paid. Revenue is the total amount of goods and services sold. Because it is essential to determine if a business is a growth stock or a value one, profitability is important. To learn more about growth stocks, see 12 Best Growth Stocks to Buy and Hold in 2024. You can also discover some undervalued value stocks by reading 11 Oversold Value Stocks To Buy Now.

The U.S. stock market has seen several major events since 2000, including the dot-com boom and fall, the 2008 financial crisis, a tech boom with trillion-dollar values, and the 2020 pandemic crisis. The S&P's broader market index produced double-digit yearly returns thirteen times between 2003 and 2023. This strong performance can be largely attributed to the phenomenal returns generated by technology stocks, which significantly boosted the overall return of the large-cap market.

According to a recent estimate, the aggregate market value of the top seven S&P 500 corporations is almost double that of the Japanese market. The head of topical research and global economics, Jim Reid, cautions that this is the most concentrated the US market has ever been.

As interest in growth stocks increases due to the hype surrounding AI and the prospect of rate cuts, these companies' fortunes are expected to soar. To satisfy market demand, businesses are making significant investments in AI. AI's impact on altering work patterns was highlighted by Satya Nadella du. According to them,:

“A growing body of evidence makes clear the role AI will play in transforming work. Our own research, as well as external studies, show as much as 70% improvement in productivity, using generative AI for specific work tasks."

Our Methodology 

To identify the most profitable stocks, we looked at the 20-year annualized returns of publicly traded companies in the US market from 2004 to 2024 and selected and ranked those with the highest 20-year annualized returns.

Aerial view of tall antenna towers and the landscape around them.

SBA Communications Corporation (NASDAQ:SBAC)

20-Year Annualized Return: 20.97% 

SBA Communications Corporation (NASDAQ:SBAC) is a real estate investment trust (REIT) that specializes in providing wireless communications infrastructure.

In Q1 2024, SBA Communications reported total revenues of $657.9 million, a 2.6% decrease from $675.5 million in the prior year period. The decline was primarily due to a significant drop in site development revenues, which fell by 49.2% to $29.6 million. However, site leasing revenue which is the main driver of SBA's profitability, increased by 2.1% domestically to $461.5 million and by 2.8% internationally to $166.8 million. This growth was driven by steady demand for leasing space on SBA’s towers, reflected in the overall site leasing operating profit, which rose by 3.3% to $513.4 million, contributing 98.8% of the company's total operating profit. The company's net income surged to $154.5 million, or $1.42 per share, boosted by a $93.0 million non-cash benefit related to revised estimates of the useful lives of towers and certain intangible assets, despite a $28.5 million loss on currency-related remeasurements.

In Q1 2024, SBA Communications Corporation (NASDAQ:SBAC) also acquired 11 sites for $9.2 million and built 76 towers, bringing its total to 39,638 sites globally. The company also spent $13.5 million on land and easements, with total cash capital expenditures of $77.3 million. Additionally, SBA plans to acquire 271 sites for $84.5 million by the end of Q3 2024.

In Q1 2024, there were around 43 hedge fund holders in the company, up from 41 in the previous quarter. Diamond Hill Capital held the largest share in the company with 1,740,688 shares worth $377,207,090.

The average analyst rating for SBA Communications (SBAC) stock is "Strong Buy" based on evaluations from 13 analysts. Their 12-month price forecasts have an average target of $259.92, with a range between $227 and $327. This suggests a potential upside of 35.25% from the current stock price of $192.18.

Overall SBAC ranks 10th on our list of the most profitable stocks of the last 20 years. You can visit 20 Most Profitable Stocks of the Last 20 Years to see the other profitable stocks that are on hedge funds’ radar. While we acknowledge the potential of SBAC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SBAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

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Disclosure: None. This article is originally published at Insider Monkey.