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Cable Operators

Crawford Bulks Up Content Holdings

2/20/2005 7:00 PM Eastern

Some closely watched securities filings last week showed that some big institutional investors modified their media portfolios in the third quarter of 2004 — with some surprising results.

One of the most influential money managers in the media space — Capital Research Group senior vice president Gordon Crawford — spent the last three months of 2004 dumping shares of cable operators in his two funds (Capital Research & Management and Capital Guardian Trust) and loading up on programmers.

Buyers and Sellers
Who's Buying What:
Source: SEC documents
Capital Research & Management:
News Corp. Class B: 89.5 million
Liberty Media: 17.4 million
Disney: 16.5 million
Barclays Global Investors:
Comcast: 9.1 million
Charter: 5.9 million
Berkshire Hathaway:
Comcast: 5 million
Who's Selling What:
Capital Research & Management:
Time Warner: 13.8 million
Comcast: 11.66 million
Capital Guardian Trust:
DirecTV: 12.9 million
Barclays Global Investors:
Viacom: 13.6 million
Time Warner: 7.9 million
Janus Capital Management:
Time Warner: 14.2 million
Comcast: 10.8 million
Liberty Media: 9.96 million

Capital Research bulked up on The Walt Disney Co. (adding 16.5 million shares, to finish with 33.7 million shares); Liberty Media Corp. (17.4 million shares, to finish with 141.5 million); and News Corp. (89.5 million Class A shares, to end with 137.4 million). It dumped 11.66 million Comcast Class A special shares and 9 million Comcast Class A common shares.

Crawford's Capital Guardian Trust halved its holdings in Insight Communications Co., to 1.1 million shares from 2.4 million, and exited Mediacom Communications Corp. altogether, dumping 1.7 million shares, while loading up on News Corp (2.8 million shares) and Time Warner (5.7 million shares).

Crawford still holds substantial interests in Comcast — 45 million Class A common shares and 17.4 million Class A special shares.

JANUS SOLD 2 MSOS

Janus Capital Management, the Denver-based investor that was an early player in the cable space, shed 10.8 million Comcast Class A special shares and 14.2 million shares of its Time Warner Inc. stock.

Janus finished the year with 41.8 million Comcast Class A special shares and 890,166 Class A common shares. It also held 92.3 million shares of Time Warner.

While these longtime cable stockholders seemed to soften their position on the industry, other smaller players began beefing up their MSO holdings.

San Francisco-based Dodge & Cox was one of the biggest buyers of MSO stocks during the period, boosting its position in Comcast to 80.2 million shares (up 8.4 million from Sept. 30) and more than doubling its position in News Corp. to 113.8 million shares from 53.2 million shares in September. Dodge & Cox has been steadily growing its holdings in Comcast — it held about 42.3 million shares on Dec. 31, 2003.

And legendary value investor Warren Buffet doubled his Berkshire Hathaway fund's position in Comcast to 10 million shares from 5 million in September.

Berkshire bought the Comcast shares through its GEICO auto insurance subsidiary. GEICO's investments are managed by Louis Simpson, a former member of Comcast's board of directors.

Cable stocks are coming off a sluggish year — the MSO sector declined about 8% in 2004 after an 18% gain in 2003 — but are starting to show some strength this year. Since Jan. 3, the MSO sector has risen nearly 1%.

PROGRAMMERS REBOUND

Content stocks didn't do much better in 2004 — shares of the three biggest content providers (Disney, Fox Entertainment Group, Liberty Media and Viacom) were down 0.3% for the year.

However, these stocks are also starting to rebound, showing a gain of about 3.6% since the beginning of the year.

Citigroup Smith Barney cable and satellite analyst Niraj Gupta said cable stocks were hit hard in the first half of 2004, amid negative news regarding satellite subscriber gains and the telcos' push into video. But they rebounded in the second half of the year.

“The tug of war, so to speak, in cable is really a battle between those that think the stocks reflect enough of a long-term competitive risk and they don't reflect the benefit of things that could go right, like widespread success of [Internet-protocol} telephony and the possibility of an increasingly better product,” Gupta said.

Gupta added that while the argument for both content and distribution is compelling, reducing holdings in one or the other doesn't necessarily mean a vote of no confidence.

 

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