Sivy 70: Comcast to replace AIG Sivy 70: Comcast to replace AIG We are dropping AIG from our list of top growth stocks, and adding Comcast, the No. 1 cable company. June 14, 2005: 5:42 AM EDT By Michael Sivy, CNN/Money contributing columnist NEW YORK (CNN/Money) - The Sivy 70 list consists of leading growth and growth-and-income stocks that should make up the bulk of most long-term investors' portfolios. Though they all have the characteristics that conservative long-term investors should look for, not all of these stocks are a "Buy" at any given point in time. Sometimes shares of high-quality companies are too pricey. And occasionally leading companies disappoint or suffer temporary setbacks. These are not necessarily reasons for dropping the stocks from the Sivy 70 list, and I try to make changes to the list as rarely as possible. It's a different story, however, when a company's problems undermine confidence in its long-term potential. I believe that AIG has now reached that point. I still think that AIG shares are undervalued. Long-term investors can hold it as a potential turnaround. But AIG's recent restatement of earnings for the past five years has reduced cumulative net income and book value by billions of dollars. The company has also announced that it will no longer provide earnings guidance and that profits will likely be volatile in the future. Accordingly, I am removing AIG from the Sivy 70 list. As a replacement, I am adding Comcast. The nation's leading cable television company, Comcast has more than 21 million subscribers. A deal with Time Warner, owner of this Web site, to buy Adelphia and divide its operations could add another 1.8 million to Comcast's base. After the deal is completed, Comcast would have more than 23 million subscribers, compared with more than 14 million for Time Warner, the No. 2 company in the industry. Comcast's basic subscriber service is stagnant, but growth potential is high in three leading-edge businesses. Digital television service, which ultimately allows for viewing movies and other programs on demand, is growing strongly and topping analysts' estimates. Revenue from providing high-speed Internet access is also expanding. Finally, Comcast plans to launch digital telephone service in several large U.S. cities during the coming year. Altogether, Comcast is projected to increase earnings at a compound annual rate of 15 percent over the next five years. Growth in cash flow and similar measures should be comparable. Comcast has several different classes of stock because of the company's complex history. The Roberts family has also retained a class of stock that gives it extra voting rights and a high degree of control over the company. The Class A shares (CMCSA) are the ones included in the S&P 500 and are the most actively traded. Judged by its price/earnings ratio alone, Comcast (Research) looks like a pricey stock. Based on projected earnings for 2006, Comcast has a P/E above 30. But because of the large noncash charges for depreciation and amortization in the cable TV business, many analysts value Comcast based on its cash flow, instead of earnings. By that measure, the stock trades only slightly above the valuation of the average high-quality company. Given Comcast's leading position in an attractive industry and growth prospects well above those of the overall market, the stock looks like an appealing long-term holding. Analysts currently consider the stock undervalued and see potential gains of 15 percent to 30 percent over the next 12 months. Sivy on Stocks resources: Sivy 70: America's best stocks Guide to Growth ___________________ Michael Sivy is an editor-at-large for MONEY magazine. Click here to receive Sivy on Stocks via e-mail every Tuesday.   Quelle "Sivy 70: Comcast to replace AIG" : Cnn.com Main page for "Sivy 70: Comcast to replace AIG"