LBTYA

Public companies mentioned herein: Liberty Global (LBTYA), Vodafone (VOD) and Comcast (CMCSA).

Highlights

Liberty Global operates a European cable operator with a presence in the UK, Germany, Belgium and Holland markets. The stock is down around 10% year to date on concerns ranging from rates, to the company’s current leverage of roughly 5 times, to recent currency fluctuations. The long thesis for some time now has held that Liberty Global’s opportunity in European cable is akin to “Comcast on steroids” given that pay TV penetration in Europe a few years ago was roughly 60 percent versus 90 percent penetration here in the US. Further, although broadband penetration in Europe is roughly in-line with the US, the expectation was that LBTYA would likely continue to win share from European telcos and eventually enjoy meaningful pricing power as a result. Thus far, however, the bull case hasn’t panned out quite as well as expected, resulting in reduced expectations and increasingly poor sentiment. The presenter is long shares on the thesis that the stock is cheap, sentiment can’t get much worse, and the business appears to have bottomed. He also sees the potential for strategic optionality with Vodafone (VOD), with which LBTYA currently has a JV in Holland.