- Comcast has more than doubled the return of the S&P 500 since the bottom that commenced the current bull market almost nine years ago.
- The stock is producing compounding returns for shareholders with double-digit growth and margins.
- Nonetheless, Mr. Market has oversold the cable and media giant from overblown concerns of cord-cutting, fake news, box office receipts, and theme park attendance.
- The downside risk is noteworthy, but we agree with our favorite hedge fund manager that Comcast is perhaps a rare mispriced long play in a shortsighted market.
Cable and media giant Comcast (CMCSA) may have lost to Disney (DIS) in the Fox (FOX) (NASDAQ:FOXA) asset grab, but we like CMCSA as a contrarian idea to the market's baked-in cord-cutting fears.
Diversified along the broadband spectrum of video, voice, internet, smart home, and mobile, Comcast is a major provider that should benefit from the net neutrality fiasco. Plus, as does Disney, Comcast owns a major network, a movie studio, an animation studio, and theme parks. Content is king, and there is no reason Comcast cannot compete with Disney in the Netflix (NFLX) and Amazon (AMZN) streaming wars.
The company's shareholder yields are relatively generous and protected by a wide economic moat from a diverse portfolio of entertainment content and technology producing double-digit growth and margins. Despite issues with debt coverage as an insatiable lender, CMCSA is currently presenting as attractive in our three favorite valuation multiples: price to sales, price to cash flow, and enterprise value to operating earnings.
Accumulation of CMCSA by our favorite hedge fund manager has summarily erased any reservation we may have had on the downside risk of the stock.