<p>Like all other stocks in America, Comcast (NASDAQ: CMCSA) has got coronavirus blues. Down 15.2% so far (including dividends) through March 11, the Comcast share may be a tempting buy for some investors.
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Are you going to pull the trigger? I have no particular answer for you at this stage of the game.
However, it is not difficult to imagine that the markets will continue to fall now that a bear market has arrived. CNBC’s analysis shows that the average bear market lasts about 13 months. If that’s true, you’ll probably not be able to fight the trend with Comcast or most other major stocks for that matter.
That said, I do not suggest you stay in cash next year and three months; instead, I think you need to consider alternatives that put you at risk. Buying Comcast shares in a bubble, as if there is no other stock, would be stupid. By only adding a second large capital to your portfolio, you reduce your company-specific risk by 50%. Add a third and cut it a little more. And so on.
As I write this, Dow has dropped by another 2000 points and Comcast has dropped by 4% – let me quickly give you a brief summary of Comcast’s buy and sell recommendations from two InvestorPlace contributors.
You should sell Comcast stock
InvestorPlace’s Larry Ramer recently suggested that cable-winding headwinds make Comcast increasingly vulnerable.
Interestingly, Larry did not mention the hit that the company’s theme parks will take. In Asia, Universal Studios Japan was shut down for two weeks. It was expected to resume on March 16. Now that the World Health Organization has called the coronavirus a global pandemic, the closure could go further.
Here in the United States, it’s just getting started. Coronavirus will get much worse before it gets better. This means lower revenues in their American parks and resorts.
As for my colleague, he believes that given Comcast’s video and NBC business weakening due to the cut, investors should sell their shares. Add to that the lack of revenue from its park business and things do not look promising in the short term.
Buy at Dip
Matt McCall and the crack InvestorPlace research staff suggested on March 5 that the Comcast share was an opportunity for the dip. To be fair to them, no one could have predicted the market downturn that came shortly after that, but here we are.
Still, some of their points remain valid reasons why you might consider buying Comcast right now.
For example, McCall and the company point out that nothing has changed in Comcast’s overall history. It was a good buy in the telecom industry before this correction of 20% +. And now it’s an even better buy.
While Ramer does not agree with this assessment, the general perception that Comcast is still a good buy in the telecom and media industries is not unique. For every negative due to revenue losses from the coronavirus, analysts claim that a company like Comcasts can benefit from people staying at home and using some of their products and services.
“The cable communications segment (which consists of both cable and Internet services) drives over two-thirds of the profits. It can get some help in this environment. Comcast customers may well delay or reverse decisions to “cut the cord.” They were able to upgrade their Internet to improve their streaming experience, “McCall wrote on March 5.
He also points out that Comcast’s theme park business accounts for only 7% of its total revenue. It’s a blip. Nothing more.
McCall believes that the Comcast share is reasonably valued at this time with 13x 2020 consensus earnings per share.
The alternative purchase
The last time I wrote about Comcast was in August last year. At the time, I considered CMCSA an affordable buy, but felt that investors should hold back cash to buy when the next major correction happens.
That correction is here. It is about 16% down since the end of August. However, it has another 15% reduction to get down to the low $ 30s where I suggested buying a little more.
Unfortunately, with the world on high alert, it’s impossible to know if Comcast will return to the $ 40s anytime soon.
Therefore, if you like the stock but are unsure to buy it right away, you should consider the iShares Evolved US Media and Entertainment ETF (NYSEARCA: IEME), an actively managed ETF that only charges 0.18%.
IEME’s top holding is Comcast, with a weighting of 6.84%. The ETF uses artificial intelligence to select stocks for its portfolio. it’s a cheap way to gain exposure for comcast while maintaining a measure of diversification. Netflix (NASDAQ: NFLX) and Disney (NYSE: DIS) are also among the top 10 along with a couple of video game companies.
If people stay at home in large groups, TV-related companies should do well.
Will Ashworth has been writing about full-time investing since 2008. Publications where he has appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and several others in both the United States and Canada. He especially likes to create model portfolios that pass the test of time. He lives in Halifax, Nova Scotia. At the time of writing, Will Ashworth had no position in any of the above securities.