Two weeks ago, I was talking to one of my analysts and he brought up a couple of stocks he thought could be really interesting over the next 12 months.
Remember, I am a technician and not a fundamental analyst, and the analysts I trust are all technical guys. He said these two stocks showed solid bottoming formations on their charts in the fall, which could lead to solid gains in the next year. When he mentioned the names, I was surprised.
This analyst told me to check out Time Warner and Comcast, both very large cable and media companies. While cable has been a steady wealth creator over the last 30 years, the recent past has not been stellar.
Both of these stocks have languished, even in the face of a pretty good bull market. On the charts, I could clearly see the stocks coming out of bottoming formations, but nothing grabbed me on the immediate timing front.
Then, last week, I read some news that opened my eyes. None other than Warren Buffett himself was the support in Comcast, and the famous hedge-fund manager George Soros was buying both Comcast and Time Warner.
In the fourth quarter, Buffett doubled his stake in Comcast to 10 million shares, according to SEC filings, which also showed Soros bought 2.6 million shares each of Time Warner and Comcast. That’s the kind of money it takes to put a bottom in place.
I never buy a stock just because I read that Buffett or any other famous Wall Street operator took a position in it. But, in general, I do trust his sense of value. Add to that a smart hedge-fund manager like Soros who has a good touch in the markets and I might just start buying.
From what I have read, these two mega-investors are attracted to the potential cash flow improvements in cable. Perhaps that explains why Buffett bought Comcast and not Time Warner. Comcast is much more of a pure cable play while Time Warner has massive operations in Internet and other media businesses.
There is another media company with a chart that looks like a bottom may be in. Emmis Communications Corp., our local radio and television company, may have turned a real corner a few weeks ago when the stock dropped to the $17 level.
The last few weeks look like a V on the chart, which means the stock could use a little consolidation or pullback here, but I plan to buy some if it does pull back. Emmis has been locked in a downtrend for a year and forays into a stock like this carry a fairly high level of risk. But I thought I should alert you nevertheless.
Hauke is a local money manager. His column appears weekly. Views expressed here are the writer’s. Hauke can be reached at 566-2162 or at email@example.com.