Fidelity Portfolio Manager Pranay Kirpalani says demand for wireless coverage has intensified in recent years due to increased mobile internet usage, driven by everything from web browsing and social networking to video file sharing and e-commerce, all of which has led to strong demand for wireless tower providers.
“I believe companies specializing in wireless communication infrastructure—often referred to as tower companies—are among the most exciting investment opportunities I see,” says Kirpalani, who manages Fidelity® Infrastructure Fund (FNSTX). “Growing consumer demand for fast, low-latency wireless service that requires a dense network will continue to provide a long growth runway for these firms.”
In managing the fund since its inception in 2019, Kirpalani targets “best of breed” companies exposed to powerful secular trends, believing such businesses are likely to provide high stability, earnings growth, and dividend growth.
As the secular trend of data usage grows, with more devices connected to the internet and networks densifying in response, Kirpalani says tower companies are well-positioned to experience long-term structural, organic growth.
Among notable fund holdings as of November 30 were wireless infrastructure firms Cellnex Telecom (CLLNY), American Tower (AMT). and Crown Castle (CCI). Kirpalani considers each a high-quality company that is well-positioned for the longer term and potentially able to weather the ongoing inflationary environment.
“These companies’ business models employ multiyear, long-term contracts, which often create visibility into future cash-flow streams—a solid indicator of growth and an important consideration in my investment process,” he says.
Kirpalani adds that these contracts also include annual pricing escalators and inflation-linked pricing, which is especially attractive when inflation is rising quickly. The businesses maintain a cost base that can be managed below headline inflation, according to Kirpalani.
“The outlook for these businesses is highly promising,” says the portfolio manager. “After a dramatic spike during the pandemic, data usage has continued to surge at a compound annual growth rate of 23%. The ongoing rollout of 5G networks also is propelling demand for wireless usage.”
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Pranay Kirpalani is a research analyst and portfolio manager in the Equity division at Fidelity Investments.
In this role, Mr. Kirpalani is responsible for providing research and recommendations on several stocks across Global Infrastructure and serves as portfolio manager of the Fidelity Infrastructure Fund. He has been in the financial industry since 2013.
Mr. Kirpalani earned his bachelor of arts degree in economics from The University of Pittsburgh.