In our latest Investment Perspectives paper, Ann M. Miletti and Thomas D. Wooden, CFA—portfolio managers for the Wells Fargo Advantage Opportunity FundSM—discuss how several cable company stocks have been outperforming market expectations by growing their revenues from broadband internet services, which have higher profit margins than channel subscriptions.
Our team continuously looks for stocks that we believe are selling below our estimate of private market value (PMV), or what we believe a private equity investor would pay to acquire the entire business. We have found several such investments within the cable industry and believe that the PMVs of certain stocks in the sector continue to offer compelling value for patient investors. In our assessment, investors are overestimating the effect that the recent stagnation in video subscriptions will have on cable company earnings just as cable companies are strongly benefiting from growth in higher-margin broadband internet services. Because of investors' focus on near-term negative trends in the video space, we have been able to uncover several companies that we believe have stronger fundamentals than their equity prices would suggest.
The full report is available here. For more insight on the industry, you can also read Ann’s latest guest post, Taking advantage of mispriced opportunities: Cable TV companies.
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