We recently published a list of 7 Cheap Blue Chip Stocks to Invest in Now. In this article, we are going to take a look at where Comcast Corporation (NASDAQ:CMCSA) stands against other cheap blue chip stocks.
Should Investors Revisit the Idea of the S&P 500 Being a Low-Risk Investment?
The technology sector has been the highlight of the stock market. On September 23, Reuters reported that hedge funds bought US tech and media stocks at the fastest pace in the last 3 months, last week.
With the interest rates falling, industrial spending is expected to revive as the companies can now borrow at lower costs and upgrade their technology and other related products. These high borrowing trends within the businesses are expected to boost the earnings of the tech companies further.
However, as far as the consumer sentiment towards borrowing is concerned, it seems that the market demands more rate cuts before it starts borrowing. We discussed how the borrowing trends are expected to perform in 7 Cheap Beginner Stocks to Invest In. Here’s an excerpt from the article:
“The Federal Reserve has approved the interest rate cut of 50 basis points, which at least for the time being is turning out to be good for the stock market. The interest rate cut also means that businesses and consumers have received immediate relief, but is the public ready yet to jump out of their high inflation rate mindset?
According to a recent report by Reuters, even before the Fed announced a rate cut the financial markets had already begun making credit cheaper for consumers and businesses. Mortgage rates were slightly down, corporate bond yields were also cut, and day-to-day personal and auto loans were also eased. For instance, the average rate a person had to pay for a 30-year fixed home mortgage is 6% after decreasing 2 percentage points from a year ago. Moreover, as per Redfin, a real estate firm, the average median price of houses sold in the middle of September was $3,000 less than the all-time high prices in April and represented a 3% decrease year-over-year. A recent survey shows that while inflation has come down significantly during recent times, the public mood is still distracted due to the past two years of high inflation.”
Turning back to how investors might revisit their idea of S&P being a low-risk investment. This idea was pitched by Bill Nygren, the Chief Investment Officer at Oakmark Funds in a recent CNBC interview. His approach reflects a strategic shift as to how investors might view the S&P 500 and mega-cap stocks in the current market situation. He pointed out that while the index has traditionally been viewed as a diversified index, in reality, it is just a bet on a few large technology companies. Currently, around half of the S&P 500 is dominated by some 25 large tech names, which essentially diminishes its original diversification.
Bill Nygren, emphasized the importance of having a more diversified portfolio beyond just mega-cap stocks. He believes that diversification of the portfolio provides better risk-adjusted returns compared to relying solely on a few big companies. We have also discussed Matt Stucky, Northwestern Mutual Wealth Management’s chief equities portfolio manager, talking about a similar strategy in 13 Most Undervalued Blue Chip Stocks To Buy According To Analysts.
The investment strategy that Nygren is vouching for suggests that the current market scenario where investors are favoring positive momentum stocks can lead to missed opportunities in other undervalued sectors such as financials and energy. He believes that the potential lucrativeness of the Tech sector has overcrowded the space creating opportunity in other sectors.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A couple watching their favorite show on TV, enjoying the entertainment network service.
Comcast Corporation (NASDAQ:CMCSA)
Forward P/E Ratio: 9.57
Earnings Growth This Year: 5.50%
Number of Hedge Fund Holders: 61
If you are considering investing in a company that runs the media and television industry, you might want to add Comcast Corporation (NASDAQ:CMCSA) to your watchlist.
It is one of the biggest media and internet providers in the United States with operations internationally. It provides broadband and wireless connectivity services, video streaming services, and content creation and distribution services through renowned brands such as NBC, Telemundo, Universal Pictures, and Peacock. The company also operates various theme parks in the country providing entertainment for visitors.
With the traditional television broadcast services going out of trend it seemed the business of Comcast Corporation (NASDAQ:CMCSA) might be in trouble. However, its diversified mix of revenue streams is resulting in the company performing above analyst expectations.
In the second quarter of 2024, revenue declined 2.7% year-over-year, mainly due to the tough comparison with a strong quarter last year when a major film was released. Regardless, the company still exceeded analyst EPS expectations by 9%.
Internet Connectivity & Platforms remains one of the key segments for Comcast Corporation (NASDAQ:CMCSA). During the latest quarter, it added more than 322,000 wireless lines with a 12% penetration rate of domestic residential broadband customers. Overall, the company has more than 32 million broadband customers reinforcing its market leading position in the industry.
In addition, the management has remained focused on maintaining a healthy average revenue per user. During the second quarter, Comcast Corporation (NASDAQ:CMCSA) was able to maintain a good ARPU growth rate of 3.6%, which is within its historic range of 3% to 4%.
The stock is also trading at a 28% discount to its sector, with earnings expected to grow by around 6% during the year to reach $4.2. Thereby making it a cheap blue chip stock to invest in now.
ClearBridge Large Cap Value Strategy made the following comment about Comcast Corporation (NASDAQ:CMCSA) in its Q3 2023 investor letter:
“Long-term holdings Charter and Comcast Corporation (NASDAQ:CMCSA) delivered strong second-quarter results relative to expectations; their stable recurring revenue streams and undemanding valuations were rewarded in the current environment. Cable multiples compressed over the past 24 months on fears of heightened competition in their core broadband business from fixed wireless and fiber providers. While fiber remains a competitive alternative to cable broadband over the long term, high upfront investments and a materially higher cost of capital are resulting in slower buildouts than previously expected. Fixed wireless also continues to gain traction, particularly in rural markets, but share gains also appear to be moderating. At the same time, both Comcast and Charter are expanding their footprints into rural and adjacent markets while gaining wireless market share, leveraging their mobile virtual network operator agreements with Verizon. We think both cable companies are well-positioned to continue to grow while generating substantial free cash flows. We added to Comcast during the quarter.”
Overall, CMCSA ranks 7th on our list of 7 cheap blue chip stocks to invest in now. While we acknowledge the potential of CMCSA to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
