The Week that Was: Heinz, GM and Comcast

Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

If nothing else, President’s Day gives investors a bit more time to digest last week's stock price moves and get lined up for the week to come. Opportunities arose that included undervalued stocks -- and they remain so even after solid run-ups last week. One however jumped to a point investors would be wise to grab some profits.

As mentioned in last week's article, Friday was a busy day for consumer staples. Heinz (NYSE: HNZ), General Mills (NYSE: GIS) and Campbell’s (NYSE: CPB) all had news to share. Thing is, the only one of the three with any good news was Heinz and they had a lot of it. Shareholders were rewarded with a 4.5% pop after management disclosed an increase in revenues in spite of higher commodity costs and a slight decrease in domestic sales. These were the same reasons both GIS and CPB either reported poor results or -- in the case of General Mills -- prepped investors for what is going to be disappointing news.

Even after the nice run, Heinz remains a sound choice for investors. At just over 18 times trailing earnings -- and even better a mere 15 times forward earnings -- HNZ remains a good opportunity for both growth and income -- boasting a 3.5% dividend yield. Heinz is still a Buy.

Yeah! GM (NYSE: GM) is back. Just a year and change removed from a bailout and near financial ruin, as we discussed last week GM reported what can only be described as outstanding results. Net income was flat quarter-over-quarter but on an annual basis GM reported the highest profit in company history. And the timing couldn’t be better -- in what virtually everyone recognizes is going to be a banner year for automakers, GM is one of the best values in the sector. Ford (NYSE: F) remains the cream of the crop but at under 6 times earnings GM is becoming harder to ignore.

Though the stock was relatively flat on Friday, the run-up GM shareholders enjoyed on Thursday must have felt like a breath of fresh air. But that begged the question -- what’s the outlook for the rest of 2012? The answer is darn good; GM remains a strong Buy.

Another positive set of earnings numbers came last week from cable, internet and content provider Comcast (NASDAQ: CMCSA). Quarterly revenues were up about 3% and better still income exploded to $1.29 billion from Q4 2010’s $1.02 billion. Hey, that’s great stuff and not surprisingly investors jumped on the bandwagon and enjoyed a nice ride. But as noted in Wednesday’s write-up the stock was already the most expensive of the bunch, and became even more so after Thursday. At nearly 20 times earnings CMCSA is trading at a premium compared to others in the sector -- on both a current and future earnings estimate basis.  

Comcast is not a bad option for investors; it’s simply gotten a bit pricey after setting a new 52-week high and there are questions of how much upside is left in the near-term. Both Time Warner Cable (NYSE: TWC) and Cablevision Systems (NYSE: CVC) trade at much more reasonable multiples, and both offer better dividend yields. As a result, CMCSA upside is limited and current shareholders would be wise to consider taking profits.


The investment opinions included are just that, opinions. Investing involves risk, as you well know, so consider your decisions wisely. Tim holds no position in the securities mentioned in this article.

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