Category Investments

Stock Pick of the Week

20 January 2022 Momentum Securities

THIS WEEK’S PICK: Comcast Corporation

About: Comcast Corporation is an American multinational telecommunications conglomerate headquartered in Philadelphia, Pennsylvania.

Francois Strydom, CFA - Portfolio Manager - Momentum, shares his insights.

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We are continuing our theme of high inflation, followed by an interest rate hiking cycle and we are looking for stocks that can continue to pay a dividend, can continue to grow earnings in an environment where discretionary spend might be hampered by a reduction in spendable income.

One of those companies we feel is a perfect suit is Comcast Incorporated, a media entertainment and broadcasting company in the US. 50% of Comcast’s revenue is generated through fibre telecommunications and wireless telecommunication. So very stable sort of revenue stream if you want to look at earnings being grown consistently.

As more clients sign on to the fibre network, wireless network, 5G coming into effect, that is revenue stream we see as a consistent growth engine for Comcast. But what makes Comcast unique is this solid base of revenue topped by some really interesting discretionary spend that's not as volatile as you would think.

So, 25% of Comcast revenue is radio network, video streaming and video telecommunication services. 2% of their total revenue is from what you call theme parks, universal parks, Universal studio theme parks.

Now, it pays a solid dividend of 2%. It is not massive, but it’s more than adequate in this environment. It is not that expensive relative to history on a five-year average, its historical P is very much in line with what was traded before. On a forward P is slightly cheaper than where we have seen it on an average in the last five years. And the median sell site analyst is calling Comcast at about $63 which is 22% higher than where we see it now.

So, on a technical basis, we traced them back to the $50. The $51 mark, is for us a good entry point for those clients who have not got their Comcast exposure yet. With a model waiting of about 4% we are more than comfortable to say that Comcast is one of those valued stocks that we can take into the next interest rate hiking cycle.

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