Finance

Cable Profits Reward Fund Giants

Investors Cashing Out, Seeking Bargains Within Sector 2/24/2013 7:00 PM Eastern

The “buy low and sell high” strategy of investing was on display in the attitude top media mutual funds took toward cable stocks in the fourth quarter.

Major fund players such as Capital Research Global Investors, Janus Capital Management and Franklin Resources appeared to engage in some profit-taking in the last three months of the year, selling off large blocks of Comcast (the top performer among MSO stocks in 2012, rising nearly 58%). Some funds used a portion of their considerable resources to buy less pricey stocks like Cablevision Systems, which gained about 5.1% in 2012 but was priced at $124.94 each at Dec. 31.

CRAWFORD TOP SELLER

Capital Research, the fund that was formed by media legend Gordon Crawford, who retired in April, seemed to be selling the most. The fund, which has about $1 trillion in assets under management, shed about 14.1 million shares of Comcast Class A shares and 1.3 million Comcast “K” shares during the fourth quarter, taking a small bite from their total holdings in the stock.

Cap Research ended the period with a considerable Comcast stake — 91.2 million “A” shares and 27.3 million “K” shares, according to its quarterly statement filed last week with the Securities and Exchange Commission. Capital Research also sold about one-third of its DirecTV stock — 11 million shares, ending the period with 27.1 million shares — and nearly half of its News Corp. stake — 49.3 million shares, ending the period with 51 million shares.

“There’s an old phrase: ‘You won’t go broke taking profits,’ ” ISI Group media analysts Vijay Jayant and David Joyce said in an e-mail message. “It’s impossible to know the entry points for these investors, but in a very strong year for stock performance in this sector, it would have been prudent to recognize some profits.”

Cable stocks had a strong year in 2012, up 42.5% fueled by improving customer metrics and strong financial performance despite the continued sluggish economy.

Other funds that took the selling cue include Franklin Resources, which unloaded about 26.3 million shares of Comcast nonvoting “K” shares, 10.2 million shares of The Walt Disney Co. stock and 3.6 million shares of News Corp. stock during the past three months of the year. Janus Capital Management, an early backer of Comcast, sold about 8.9 million shares of the cable giant’s Class A shares, reducing its holdings from about 9.1 million shares to about 813,099 shares as of Dec. 31. Janus beefed up its holdings of Comcast “K” stock from 563,399 to almost 3.5 million shares in the period.

BARGAIN SNATCHING

Not every fund was in selling mode, with some identifying a buying opportunity in lower-priced stocks like Cablevision — Janus added nearly 1.3 million shares of the Bethpage, N.Y.-based MSO’s stock — in the hopes that a run-up could be in the making.

Joyce and Jayant noted that depending on the entry points for the funds, “it could make sense to be a ‘contrarian’ with names that might be out of favor.”

But the buying spree also included some powerful names in the sector including Disney and Discovery Communications, which saw their share prices rise by 33% and 55% in 2012.

Vanguard bought about 3.1 million shares of Disney, 2.2 million shares of Comcast “A” stock and 200,000 shares of Comcast “K” stock in the period. Janus also added about 1.5 million Discovery shares as well as 3.9 million shares of Disney.

WHO’S BUYING

Vanguard Group:

Comcast (A): 2.2 million shares
Comcast (K): 200,000 shares
The Walt Disney Co.: 3.1 million shares

Janus Capital Management:

Walt Disney Co.: 3.9 million shares
Comcast (K): 2.9 million shares
Discovery Communications: 1.5 million shares

WHO’S SELLING

Franklin Resources:

Comcast (K): 26.3 million shares
Walt Disney Co.: 10.2 million shares
News Corp.: 3.6 million shares

Capital Research Global Investors:

News Corp.: 49.3 million shares
Comcast (A): 14.1 million shares
DirecTV: 11.02 million shares

Janus Capital Management:

Comcast (A): 8.9 million shares
Viacom: 100,000 shares
Dish Network: 36,968 shares

SOURCE: SEC documents
 

September