Which Cable Companies Will Roll Over First? – Comcast Corporation (CMCSA)

Industries rise and fall in favor just as stocks do. Those who are alert to the patterns can make money.

Right now, for instance, 3D printing is out of favor. What is in favor? Big entertainment companies.

All of the “big five” – Comcast Corporation (NASDAQ:CMCSA), The Walt Disney Company (NYSE:DIS), News Corp (NASDAQ:NWSA), Viacom, Inc. (NASDAQ:VIAB) and CBS Corporation (NYSE:CBS) – are trading near their highs. Comcast’s acquisition of the rest of NBC Universal is one reason. News Corp.’s pending split into two companies is a second. A third reason is a raft of promised deals for infrastructure spurred by more active capital markets, as the Financial Times writes.

This is going to roll over. What goes around comes around. The weaker players will be left vulnerable by the next turn of the market.

But which are the weaker players?

CBS

CBS has been on a tear lately, in sympathy with the general trend. This was a $30 stock in the middle of January. It’s now at nearly $45.

But is there a good reason for this sudden burst of speculation? Not according to the financials. The company’s revenues for 2011 were little changed from those for 2008. And the most recent report is a disappointment – Zacks called both revenues and profit light.

There are no rumors of a buyout, and while the CBS network has good ratings compared with peers, the rest of its cable line-up is poor in a market where the number of channels you own matters more than your licenses.

Then there is CNET, which CBS agreed to buy for $1.8 billion in 2008. The site seems to be collapsing, writes The Verge, in the face of corporate interference with news gathering. The Verge itself is just one of many examples of how CNET, which was totally dominant in its niche at the time of the sale, has hit the skids. AOL’s TechCrunch, Om Malik’s GigaOM, and a host of others have all made big strides in the last several years, while CNET traffic has stagnated. (Full disclosure: I worked for CNET’s ZDNet affiliate from 2005-2010.)

It could get worse soon. AllThingsD, a site launched by Wall Street Journal writers Kara Swisher and Walt Mossberg, may soon go on the block. It’s getting the NBA free agent treatment right now, and an increased injection of capital is almost certain.

But the biggest reason to worry about CBS is a shortage of outlets. This market is all about vertical integration – owning the product and how it’s sold – and CBS has not kept up in the channel-buying market. Outside CNET, the company is little changed from what it was a decade ago. That makes it a weak sister.