What Does Billionaire Mario Gabelli See In Cablevision Systems Corporation (CVC)?

Watching the moves of activist hedge fund managers can give onlookers up-to-date information on how an investment firm is committing its capital, and it pays to keep a close eye on a fund’s SEC disclosures; discover the secrets of piggyback investing here.

The move

Billionaire Mario Gabelli disclosed a 19.1mm position in Cablevision Systems Corporation (NYSE:CVC) on the 29th of May, up almost 8.7mm shares from the amount that the fund reported holding in its portfolio at the end of March this year.

What’s it mean?

The 13D indicates that Gabelli’s family of funds now holds a stake in Cablevision Systems Corporation (NYSE:CVC) that exceeds 5%. Despite Gabelli’s exuberance, the $4.1bn cable operator has struggled to gain positive mention from Wall Street, as firms like Citi, Baird, and Wunderlich securities have given a Neutral or Hold rating to the company in the past three months.

Mario GabelliThese ratings come after Cablevision Systems Corporation (NYSE:CVC) debuted full-year 2012 earnings results at the end of February, which outlined a disappointing loss of $0.30, despite analysts hoping for $0.40 higher into positive territory. An exodus of customers across all lines of business (video, high-speed data, and voice) in the fourth quarter of 2012 account for most of the loss, although some was attributed to Hurricane Sandy.

Cablevision Systems Corporation (NYSE:CVC) saw 50,000 video, 5,000 high-speed data, and 10,000 voice customers leave in that quarter alone, amongst increasing competition from streaming service providers like Hulu and Netflix.

Would we have expected earnings to improve pre-Q1 announcement?

Not likely, as seasonal advertising revenue would surely decrease. In early May, Cablevision Systems Corporation (NYSE:CVC) announced another disappointing quarter, this time undercutting estimates by $0.13 and falling into negative territory once again. Revenue missed slightly but still dropped compared to the same quarter last year. These numbers now contribute to a forward price-to-earnings multiple that jumped to 38 compared to its trailing counterpart of 26, displaying analysts’ downward revisions of future earnings for the remainder of 2013.

From a technical perspective, Cablevision Systems Corporation (NYSE:CVC) has seen impressive growth stretching back twelve months, up over 30%. However, year-to-date performance since the start of 2013 has been a meager 3%, especially given the overall market’s bullish rise. For an investor like Gabelli, the lackluster appreciation could be a perfect opportunity to collect shares, and Cablevision’s 3.9% dividend yield could soften the blow of flat movement in the future.