“Comcastrophe” No More? – A Lot Of Smart Money In Comcast

I almost couldn’t believe it.  When I woke up this morning and opened up our accounts I saw Comcast (CMCSA) stock up something on the order of 7%.  Really not used to seeing that kind of thing.  Looking at a chart, this looks like the biggest up day for Comcast stock in the last year (CMCSA 1 Year Chart).

What happened?  Well, it looks like Comcast management took a hard look at itself and decided to take some encouraging, share holder friendly actions. 

They are going to start paying a dividend; they will repurchase $7 billion in shares over the next 2 years; management bonuses will now be tied to free cash flow as well as operating cash flow, encouraging a focus on profitability and not just growth; and they got rid of an medieval arrangement to pay Comcast Founder Ralph Robert’s estate close to $2 million a year for 5 years – after his death!!!

All of this came to a head a few weeks ago (Thursday January 17) when a letter from Chieftain Capital’s Glenn Greenberg criticizing Comcast CEO Brian Roberts and calling for him to be fired became public (see “Behind Greenberg Contest With Comcast’s Roberts” (subscription required), The Wall Street Journal, Tuesday January 22, B1).

As all this was playing out and Comcast’s stock was getting hammered, losing almost half its value from Mid July ’07 to Mid January ’08, without much fanfare a number of savvy value investors were accumulating large stakes in Comcast.

Dodge & Cox, the celebrated mutural fund shop, upped its stake in Comcast last quarter by 75 million shares, bringing its total position close to 8% of all Comcast shares outstanding.

In a December interview, renowned global value investor Jean-Marie Eveillard, recently returned to his First Eagle Global Fund, said Comcast shares are undervalued and worth $30 a share.  His fund has a solid position in Comcast.

Sanford Bernstein analyst Craig Moffet has been beating the drums on Comcast for quite some time now, calling it one of the 15 cheapest stocks in the S&P 500 as long ago as last June – when shares were 37% higher than they are today.

Glenn Greenberg and his Chieftain Capital, which own 60 million shares, 2% of Comcast, are no slouches either, racking up annual returns of 21% since their inception in 1984 by concentrating their holdings in a very few stocks about which they have a high level of conviction.  As of September 30, 2007, Comcast was the largest of their 7 holdings, representing almost 40% of their $3.75 billion portfolio (Chieftain 3Q 13F).

Has the “comcastrophe” perhaps come to an end?

Disclosure: Top Gun is long Comcast (CMCSA).

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