DIRECTV (DTV) Bears Will Get Slaughtered

Fortunately for its investors, DIRECTV (NASDAQ:DTV) has chosen to focus its investments in Latin America. The company’s first-mover advantage in the region has enabled it to grow to scale much faster than if there were serious competitors, and it effectively controls the satellite television market. This initial dominance will likely give it an insurmountable lead in the region, enabling it to earn high margins and outsized returns on invested capital. While its competitors struggle to produce growth in the United States, DirecTV will be growing for years in Latin America.

A clear mispricing

DIRECTV (NASDAQ:DTV) trades at 13x earnings, the same multiple as Time Warner Cable Inc (NYSE:TWC). DISH trades at 35x, but investors should not count on a large recovery in earnings power over the next few years.

While Time Warner Cable Inc (NYSE:TWC) has growth to spare in its Internet division, its cable TV and phone businesses will continue to decline. In contrast to DirecTV’s growing Latin American segment, it is anyone’s guess how the two stocks can trade at the same earnings multiples.

Investors who side with Berkshire will likely do much better than the market, while the shorts will get steamrolled as the value of DIRECTV (NASDAQ:DTV)’s Latin American segment becomes apparent to the market.

Ted Cooper has no position in any stocks mentioned. The Motley Fool recommends DirecTV.

The article DirecTV Bears Will Get Slaughtered originally appeared on Fool.com.

Ted is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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