Cable Operators

Funds Find Quality in Cable Stocks

2/20/2012 12:01 AM Eastern

For most of the top media mutual
funds, the fourth quarter was an opportunity
to load up on quality stocks in the MSO
sector, with most of
the major players
beefing up their positions
in Comcast,
Time Warner Cable
and DirecTV Group.

Miller Tabak media
analyst David
Joyce said that investment
funds are
largely attracted
to companies with
strong returns on
capital. And with
robust share repurchase
programs and
recently hiked dividends,
Comcast and
Time Warner Cable
fit the bill.

Comcast and
Time Warner Cable
have been at the
top of most analysts’
best buy lists
for the year, based
on strong operating
fundamentals and
their ability to return
cash to shareholders.
Last week
Comcast increased
its annual dividend
by 40% and said it would spend $3 billion
this year repurchasing its stock. Time
Warner Cable increased its quarterly dividend
by 17% in January, while announcing
a $4 billion share repurchase authorization.
DirecTV may not
be paying dividends,
but it has
been the fastest
grower among
media stock s,
adding 632,000
net new subscribers
in 2011.

Joyce added
that with the recent
turmoil in
the global markets
over the European
debt crisis,
“quality has been
the name of the
game.”

FUNDS’ TOP
PICK: COMCAST

Multichannel News
tracked the yearend
filings of four
top media funds
(Capital Research
Global Investors,
Capital Guardian
Trust, Janus
Capital Partners
and Franklin Resources).
With
most of the funds,
Comcast was by far the most popular stock
— three of the four funds increased their
positions in the largest MSO in the country,
except for Janus, which sold a small portion
of its shares.

At Capital Research Global Investors, the
investment fund started by media legend
Gordon Crawford, Comcast was the most significant buy at 20 million shares. The fund
sold about 2.2 million shares of DirecTV —
but kept a sizable position at 61.3 million
shares, or 8.9% of the satellite giant’s outstanding
stock. Capital Research also slightly
reduced its Time Warner Cable shares,
selling 400,000 in the period, ending with
33.2 million shares.

Franklin Resources added about 5.9 million
shares of Comcast Class-A Special
Common Shares (also known as K shares)
during the period, finishing the quarter with
47.1 million shares. It slightly increased its
position in Comcast Class A Common Stock
(also known as A shares), finishing the quarter
with 6.02 million shares.

Janus Capital, one of the early backers of
Comcast, sold about 3.9 million shares of its
Class A common stock in the quarter, ending
with 10.3 million shares. Its biggest buy
was Time Warner Cable, adding 5.8 million
shares. The next biggest buy was a bit surprising
— 3.12 million shares of Cablevision
Systems. Janus may have seen a buying opportunity
because Cablevision has seen its
share value decline rapidly; the stock was
down 42% in 2011 and lost about 10% of its
value in the fourth quarter of that year. The
fund also added about 2.2 million shares of
DirecTV stock in the period.

March