You Need a Clearer Picture of Soaring Comcast

Short-sellers and derivatives dabblers notwithstanding, the primary tenet behind maximizing your investing success boils down to the simple notion of buying low and selling high. And as with perhaps no other supersize company these days, cable king Comcast   (NASDAQ: CMCSA  ) has committed a singular act of share-price skyrocketing, but still generates less-than-deserved attention from Fools and other investors.

More specifically, during 2012, the company -- the biggest player in the land of media -- saw its shares catapult by a whopping 61%. The new year hasn't brought directional change: Since the first trading day in January and through Tuesday's close, the shares have tacked on another 6.2%.

Beginner's luck
Before progressing, I must confess to having watched cable's majordomo closely for slightly in excess of a dozen years. As an erstwhile analyst at Royal Bank of Canada, I once found it enticing to turn to the cable and broadcasting sector, after covering another group. By dint of luck, glomming onto Comcast as an unusually well-managed company with seemingly endless potential landed me a spot on The Wall Street Journal's All-Star Research Team during my rookie year in the sector.

I note that bit of historic trivia not to impress you, but to gain your attention. Indeed, since my first days looking under Comcast's hood, I haven't wavered in the notion that the company occupies a special spot in the universe of big-cap U.S. companies.

My first exposure to Comcast was to a company with about 8 million cable subscribers, far fewer broadband customers, and almost no telephone product. Like Elvis, it had first entered the world in Tupelo, Miss., where it consisted only of a tiny 1,200-subscriber system.

Today, it serves 23 million cable customers -- well ahead of second-place Time Warner Cable (NYSE: TWC  ) -- generates about 15% of its revenues from broadband, and boasts a solid voice-over-IP telephone offering. In an arrangement with Verizon, it also makes wireless available seamlessly to its customers.

Furthermore, its basic broadband, telephony, and cable services are being made available in a separate package to small and medium-size businesses, where the potential appears sizable. And maybe most important, as you likely know, Comcast owns 51% of content producer NBCUniversal -- complete with broadcast operations, a sizable set of cable networks, film studios, etc. -- which it bought from General Electric (NYSE: GE  ) a couple of years ago.

A fee-fi-fo-fum giant
Last month Comcast announced that it would acquire the remainder of the NBC operation for $16.7 billion. Among a myriad of other projects, NBC will broadcast the 2014 winter Olympics from Sochi, Russia, just as it did last year's summer competition from London.

I alluded above to Comcast's managerial cadre. While they're not quantifiable, I do try to factor my visceral senses of a management team's capabilities into my overall take on a company's investment potential. On that basis, I'll crawl out on a limb and maintain that in CEO Brian Roberts, NBC Universal head Steve Burke -- who ran the cable operation for a number of years -- and a host of others, Comcast is guided by the strongest leadership team of any company I've ever researched, regardless of the industry being considered.

A new cable world in the offing
Cable continues to change, a phenomenon that's unlikely to abate anytime soon. Of course there will continue to be the usual parade of acquisitions and divestitures. Earlier this month, Charter Communications agreed to fork over $1.63 billion for Cablevision's Optimum West operations, with their 360,000 subscribers in Montana, Wyoming, Colorado, and Utah.

But more significantly, there are beginning to be hints that the longtime (and in my mind, inappropriate) approach wherein your cable provider socks you with hundreds of channels -- 80% of which will never be targeted by your eyeballs -- is likely to change in favor of a la carte offerings. When that day arrives, you'll receive and pay only for networks of your choosing. That major metamorphosis won't occur overnight and will result in pain for some content providers, but I suspect you'll like it far better than the current fire hydrant system.

In that connection, Brian Roberts recently observed during an interview with Fortune magazine, "As I think about where I'd like to see us go, it is absolutely to take this overwhelming amount of content choices -- now with the Internet so many more choices -- and make them personalized, make them easy to interact with and have anything on any device."

During the same session, the interviewer began a question by stating, "Many years ago Bill Gates said that one day we'd be able to click on the shoes of a character in a TV show and buy them online." The questioner was correct, although Gates wasn't being especially prescient. As I began covering Comcast, I also followed a publicly held California company called Wink. It provided precisely that functionality, although the always methodical cable systems weren't yet ready for it, and Wink faded into oblivion.

A Foolish takeaway
The point is that the cable companies have always been cautious not to load up on new applications willy-nilly or abruptly. Nevertheless, they've now reached a level of exciting development. Comcast most of all.

For another perspective on the media space, take a gander at Netflix. The precipitous drop in the company's shares since the summer of 2011 has caused many shareholders to lose hope. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.


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