Warren Buffett is betting big on John Malone's global cable ambitions.
According to regulatory filings, Buffett's Berkshire Hathaway sold off its holdings in Dish Network and instead bought 2.9 million shares (worth $254 million as of Wednesday) of Malone's Liberty Global. Buffett actually sold a portion of his stake in Liberty Media, Malone's US operation, but continues to hold 5% of that company as well as shares in content providers like Viacom and DirecTV.
Portfolio manager John Stephenson of First Asset Investment Management believes Buffett's latest move was a smart one.
"It shows why he's so rich," says Stephenson of Buffett. "I think this is a great opportunity.… He's entering European cable/telco exposure at the right time."
Stephenson notes Liberty Global enterprise value is 8.4 times its projected EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2014. That makes it cheaper than its peer average of 9.6 times forward EBITDA. On the cash flow side, Stephenson notes the company has guided towards double-digit growth. He believes any potential spinoff of the company's Puerto Rican or Chilean assets could yield between $4 billion and $5 billion in cash.
(See: CNBC's Warren Buffett Watch)
Stephenson also says Liberty is ahead of its rivals in fiber optic cable infrastructure. "The peers also take their foot off the gas pedal when it comes to laying fiber optic cable," says Stephenson.
"It's cheap," says Stephenson. "It has tons of organic growth [and] it's a great way to play the European cable/telco space…. I'm a buyer."
What do the technicals say about Liberty Global?
To see Jeff Tomasulo, Managing Partner at Belpointe, analyze the charts on what's levels investors should watch in Liberty Global, watch the video above.
- Investment & Company Information
- Warren Buffett
- John Malone
- John Stephenson
- Liberty Global
- Berkshire Hathaway