TAKING STOCK
Comcast signal weaker; Black & Decker still has power
by Malcolm Berko
Dear Mr. Berko:
Please give me your advice on Comcast Cable at $19 a
share. My broker wants me to buy 400 shares and I'd like to have your
opinion of the company. I also have 200 shares of Black & Decker
that I bought in 2003 at $36. Please give me your advice on this company.
My broker also wanted me to add 100 more shares of Black & Decker
to my portfolio because it's down 25 points from its 12-month high.
I own 100 shares at $36 because you recommended it in 2003. He says
the drop is just temporary and that the stock will run to over $100
a share then split 2-for-1.
E.P.
Kankakee, Ill.
Dear E.P.: It pains me greatly to say something nice about Comcast
Corp. (CMCSK-$17.75) because I'm having a difficult time getting management
to speak with me.
Comcast, the largest cable company in the universe, has grown its
income sevenfold in the last 10 years, has 24 million cable subscribers,
10 million subscribers for its digital service, nearly 9 million subscribers
use its high-speed data service (big deal) and 1.5 million use its
telephone service. However, management now expects much slower revenue
growth and higher capital costs due to a slowing economy and extremely
aggressive competition.
Today consumers have to watch their nickels and dimes, demand has
gone mushy because almost everyone has cable and "poaching"
from the competition has become enormously difficult. As if that wasn't
enough, CMCSK's phone subscribers are being co-opted by the large
telecommunications companies that are gaining traction by promoting
video services. Perhaps that's why I'm hearing that CMCSK may begin
to offer color radio to generate a new revenue stream and poach subscribers
from Satellite Radio.
The share prices of Cablevision, EchoStar, LodgeNet and Time Warner
have self-destructed from highs of the last 12 months. Even Comcast's
share price crashed from last year's $29 and if estimated earnings
for 2008 come in at the Street's expected $1.05; CMCSK would sport
a respectable price-earnings ratio of 17. Management believes 2008
revenues will grow by 11 percent but feels that's too enthusiastic
and I believe that an 8 percent number is more realistic.
Still, that adds $2.5 billion to CMCSK's anticipated $33.3 billion
in revenues. Considering a $14.60 book value, perhaps CMCSK might
be attractively priced for long-term gains. The good reasons to own
CMCSK exceed negatives by a factor significant enough for me to agree
with your intent to buy the stock.
CMCSK is not the growth stock it was years ago. Today with a market
cap of $65 billion, CMCSK has become a basic utility just like the
telephone companies of the 1980s. However, a purchase at today's price
could possibly increase in value by 50 percent to 65 percent in the
coming few years. I suggest that you purchase 200 shares now; wait,
watch and if the shares move down to the $14-$15 level add 200 new
shares to your portfolio.
I'd like to take credit for recommending Black & Decker in 2003
but the stock was not on my radar screen. It should have been and
I wish it was - but it wasn't.
The advice you received on Black & Decker proves to me that
your broker has no more sense than God gave a turnip! Black &
Decker Corp. (BDK-$68.62) sells some of the best power tools, lawn
and garden tools, hardware, plumbing appliances, lock-and-key systems,
ornaments and kitchen accessories found in this country and across
the pond. But at the current price, I wouldn't go near the stock with
a pogo stick because I think earnings are going to sink like a Steinway
crashing down a deep mine shaft.
The construction industry is the largest employer in this country;
the housing boom has wilted, new home construction is at its lowest
level in 16 years, and commercial construction is beginning to melt.
So where is the demand for new circular saws, new routers, impact
wrenches, grinders, generators, hammers, etc.? Black & Decker
has its ride from where you bought it in 2003 at $36 all the way to
$97 last year. Sell the stock right now or today 'cause I believe
it's headed lower.
Please address your financial questions to Malcolm Berko, P.O. Box
1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net.
© Copley News Service
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