New Trade for November 20th, 2020

Stocks are down this morning with all the benchmarks slightly lower on the open.  Weighing heavy on sentiment is major uncertainty over the continuation of funding for some of the emergency programs implemented during the recession.  All while the spread of the virus is accelerating, yikes.  

 Investors who are looking for a value investment that could provide impressive long term gains will want to read on.  In today’s trade we’ll look at one company that regularly makes the list of hedge funds’ favorite stock picks.  What makes this stock so attractive to smart money?   

Comcast, the nation’s largest cable company, is a hedge fund favorite.  That’s because its combination of content, broadband, movies, pay TV and theme parks is unparalleled by rivals, and gives this blue-chip stock a huge strategic advantage. 

The diversification has come in handy this year as the pandemic halted movies, theme parks and spending on advertising.  Deutsche Bank’s Bryan Kraft, who has CMCSA at Buy, highlights strong broadband subscriber growth, cable margins and cable capital intensity as a reason to invest in the company. 

“While NBCU and Sky continue to be really messy given the disruption to spectator sports schedules, the ad market, theme park operations, and theatrical releases; Comcast’s Cable business’ results haven’t lost a step,” says Deutsche Bank.  “We view NBCU’s and Sky’s recovery to full earnings power as a two-year process.”

A supermajority of analysts lump Comcast in with other value stocks they’re bullish on.  Of the 31 analysts tracked by S&P Global Market Intelligence covering CMCSA, 17 rate it at Strong Buy, seven say Buy and seven call it a Hold.

That’s at least in part because Comcast stock looks like such a bargain.  Analysts expect the company to deliver average annual earnings growth of 12.9% over the next three to five years, and yet shares trade at around 20 times expected earnings.  CMCSA also sports a 1.9% yield.