Is Time Warner Cable A Good Deal For Comcast?

| About: Comcast Corporation (CMCSA)

The New Year started off with lots of jitters. So I raised the yellow flag - which is my signal for taking profits. Especially after such an extraordinary year in 2013.

My position in the market dropped to 40% invested with the remaining 60% in cash.

Then the market began to find a bit of a groove again when we found out that Yellen's first date with the market went well, but it was within only a very narrow group of stocks.

I found some buys and increased by portfolio to 65% in the stock market. I still have 35% invested in cash. I am looking for more Best Stocks Now.

I found several last week. I'm not changing my mind on the market, however. I'm changing with the market.

Here's one stock that all of a sudden has my full attention: Comcast (NASDAQ:CMCSA). This company was in the news recently when it announced its proposed $45 billion "merger" with Time Warner Cable (TWC).

Data from Best Stocks Now App

Comcast is a stock that I have owned in the past and it is also currently one of my top-rated large-cap stocks. At the time of this publication, Income & Growth customers of Gunderson Capital Mgt. are long the stock.

Headquartered in Philadelphia, Comcast provides video, Internet, phone, network, and broadcast services through Comcast and cable NBC Universal.

Not only is CMCSA a good growth, mega cap stock, it also pays a dividend of 1.7%. That is why it qualifies for my Income and Growth Portfolio, which by the way was up over 20% last year.

Who wants to own bonds for income in this rising rate environment? Not me.


Let's first take a look at how Comcast has done without Time Warner Cable over the years.

Data from Best Stocks Now App

Over the past ten years CMCSA has delivered and average of 11.3% per year to investors while the market's delivered only 4.7%. Over the past five years CMCSA has delivered 36% per year to investors, doubling the returns of the S&P 500.

That has got to be a happy annual shareholders meeting!

Over the last three years CMCSA has delivered three times the S&P 500 at 31% per year. And over the last 12 months, CMCSA is up 32%, leading the market by 11 points.

When compared against the other stocks 3,800 stock in my database, CMCSA gets a performance grade of A-. This stock is right up there with the best of the best!

For some perspective, if you look at the very best mutual funds out there you will see that they have averaged returns of 12-13% per year over the last ten years. Obviously, many stocks have blown these mutual funds away. While CMCSA almost resembles a mutual fund with all its various holdings, it's not. And its performance shows it.


I'm not a performance investor only, however. Performance only looks backward. Valuation looks forward, however.

Data from Best Stocks Now App

How much do we have to pay for these shares today? Currently CMCSA has a PE ratio of 21, with price-to-sales of 2.2, and a price-to-book ratio of 2.8.

The stock is also trading at 16.4 time's forward earnings and it's expected to grow these earnings by 20% per year over the next five years.

In other words, CMCSA is still trading at a discount to its growth rate, so it gets a PEG ratio of 0.82. I call this growth at a reasonable price.
So far, so good. CMCSA meets my performance and valuation criteria.

Two down, one to go ...

Stock Chart

I never touch stocks that are in downtrends. I like to see a catalyst that gets a stock out of sideways trends. Good, healthy uptrends tell me that the company is flourishing.

Comcast passes my technical requirement. It is currently in a nice, healthy uptrend.

With or without Time Warner Cable, Comcast is a great stock. How can it get worse if the acquisition goes through?

Out 3,821 stocks in my Best Stocks Now app database CMCSA comes in at #184.

Data from Best Stocks Now App

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CMCSA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.