Tuesday, February 15, 2005


Do the "big boys" know something you don't know? Big moves being made. One can rarely beat the "big boys" but it is often easy to tag along for a nice ride.

Warren Buffet and George Soros have made ump-teen billion dollars each. They have made this money by investing in the right companies at the right time. Recently they have each increased their investments in cable-tv companies. COMCSA and TWX are both trading higher today on the "news".

SBC, BLS and VZ three "big boys" about the same size as Buffet and a little bigger than Soros are also making big moves. Instead of buying cable-tv companies, these guys are actively building cable-tv companies. They are spending billions, buying up AT&T and MCI heavy duty trunk lines and at the same time spending billions to install fibre-optic phone lines to their customers premises.

COMCSA and TWX which already have coaxial cable in place are spending most of their efforts on selling on-demand services. Both companies are also gearing up to market internet phone services. These companies hold some aces up their sleeves. They own movies and TV shows. It will take time, money and effort for the phone companies to offer much programming without feeding their competition.

With AT&T and MCIP willing to sell without a getting premiums over recent stock prices, it is clear that phone businesses are losing revenues fast. However, SBC, BLS and VZ should not be counted out as they will grow their cell phone businesses, their high speed services and gradually add TV services. One way TV service is likely to be different is the availability of channels a la cart. Those interested in sports may be able to subscribe to ESPN for say $6 per month without having to pay for the cable-tv companies "package of channels."

We have moved into a time when value is the most important consideration for buying a stock. The problem is that value is often like beauty; it is in the eye of the beholder. Stocks like GM (General Motors) and SBC (Southwest Bell Corp) now offer dividends of about 5%. It would not take big moves from these stocks to give one a very nice total return. My money is on Buffet and Soros. They see value in the cable stocks; who am I to argue? In my house, we will tag along with the "big boys".