Comcast in Barron's (Again)

Eric Savitz writes a bullish piece on Comcast in this week's Barron's -- a month after the publication ran another positive piece by Jay Palmer. If you're not a Barron's subscriber, you can read a short Reuters report on the article for free.

Savitz quotes Craig Moffett, cable analyst at Bernstein Research, on how hard it is to recommend Comcast. The stock is down 16% this quarter, significantly underperforming both the broad market and industry sector. Moffett rates the company a buy. And I would buy it myself if I didn't already own it.

Comcast is actually one stock I bought I've never suffered much with while owning it. As you know, I own the Class A Special shares trading on NASDAQ under the symbol CMCSK. I got in at the split-adjusted price of $17.82 and the Class A Special shares closed Friday at $23.70. So even though the stock is down it remains in positive territory as far as the portfolio goes.

That's refreshing. Especially when it looks like my Japanese consumer lenders and Media General (MEG/NYSE) holding will guarantee that I spend my retirement years dining in soup kitchens. ;-)

Comments

[Hans]

"Especially when it looks like my Japanese consumer lenders and Media General (MEG/NYSE) holding will guarantee that I spend my retirement years dining in soup kitchens. ;-)"

Not to mention Mueller Water. I'm down 20% since my first purchase, and 10% from my weighted-average purchase price, after averaging down.

What are your views on them? If construction goes down big time in the next few years, this company could have quite a few problems...

[Sivaram Velauthapillai]

Dining in soup kitchens? That's all? The way Takefuji is going, I'll be WORKING in soup kitchens . Perhaps a soup kitchen in Japan? ;)

[Amit Chokshi]

I was long MWA.B around $13 and got out at $15 and never looked back. John may have his own views but I believe MWA is just misclassified as a water infrastructure play. 50% of sales come from new home sales and it was held by a priv equity firm before being sold to Walter and there was public debt so you could go back to that time and clearly see that the firm struggled when housing starts dropped. I love spin-offs and MWA has the charecteristics of a good one but the macro forces for MWA are too powerful to ignore, meaning, while I don't care about the economy when investing, in some cases, you obviously have to factor in conservative estimates for the next few years. I see these guys stuck around $1.9B to $2.0B in sales and I factored in some COGs benefits from their various plant restructurings to get to 23-24% GP margins, but even still, with SG&S running around $230MM, interest expense $95-$100MM, this business makes $0.55 in 2007 based on my estimates which are a few months stale. I have them making $0.75 in 08. So the multiples are fair to expensive for MWA. What I look for in spin-offs is incredibly high debt (I was a leveraged finance/M&A guy in my prior life) against steady cash flow with identifiable catalysts that management is pushing to increase margins PLUS steady revenues. With MWA, you have potentially declining revenues which could erode any cost benefits and deleveraging and/or the speed of deleveraging. I'd much rather go with HBI and SBH, two cos with very strong refill rates at the topline, high debt, high cash flow, and significant opportunities to increase cash flow production. The same problem with MWA of potentially declining revenues (and remember, they were spun off off of peak revenues) is the same reason I am short BR.

[John]

Hans & Amit: It is certainly looking like I'll have to commit to riding out the bad times (read: housing) with MWA. I think the company can do that. All I am prepared to say right now is that if I sell it, it will be reported here promptly.

Sivaram: Well, if I'm in the soup line you're serving I'll be easy to pick out. I'll be the guy looking shell shocked and mumbling "Japanese consumer lenders" over and over and over. ;-)