Cable One (CABO) Fell On Concerns Over the Competition

Artisan Partners, an investment management company, released its “Artisan Value Income Fund” first quarter 2024 investor letter. A copy of the letter can be downloaded here. In Q1, US equities markets surged to new all-time highs, supported by a robust US economy. The fund’s Investor Class APFWX, Advisor Class APDWX, and Institutional Class APHWX returned 4.87%, 4.87%, and 4.98% respectively, in the quarter compared to a 10.56% return for the S&P 500 Index. The portfolio delivered a good total return in Q1 comprised of premium income and substantial capital appreciation, in line with the firm’s total return expectations. In addition, you can check the top 5 holdings of the strategy to know its best picks in 2024.

Artisan Value Income Fund highlighted stocks like Cable One, Inc. (NYSE:CABO), in the first quarter 2024 investor letter. Cable One, Inc. (NYSE:CABO) is a US-based data, video, and voice services provider. Cable One, Inc.'s (NYSE:CABO) one-month return was -2.19%, and its shares lost 43.61% of their value over the last 52 weeks. On June 5, 2024, Cable One, Inc. (NYSE:CABO) stock closed at $383.73 per share with a market capitalization of $2.156 billion.

Artisan Value Income Fund stated the following regarding Cable One, Inc. (NYSE:CABO) in its first quarter 2024 investor letter:

"Our bottom contributors were Cable One, Inc. (NYSE:CABO), Philips and Universal Health Realty Income Trust. Cable One, a small cable company operating in rural US markets, was our biggest detractor in Q1. Shares have remained weak due to concerns about competition from wireless providers and depressed subscriber growth, driven in part by fewer residential moves in a frozen US housing market. Broadband subscriber additions picked up in the latest quarter, but increased promotions and discounting reduced average revenue per subscriber, and an end to the ACP (Affordable Connectivity Program) accepting new enrollees creates an additional headwind to growing subscribers. While wireless companies are entering new markets, 5G is not currently competitive with cable’s download speeds, and based on the physics of wireless data delivery, 5G is unlikely to be competitive with cable for many years, if ever. Cable continues to have a competitive advantage with respect to network speeds, reliability and capital intensity. Despite recent growth challenges, free cash flow conversion remains solid, and the valuation is highly attractive, having a free cash flow yield of ~12% and selling below our estimate of 8X normalized earnings. We like the cable business in general due to its high recurring revenue, pricing power and healthy operating leverage."

A customer in their home enjoying premium channels, high-definition set-top boxes, and whole-home DVRs.

Cable One, Inc. (NYSE:CABO) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held Cable One, Inc. (NYSE:CABO) at the end of the first quarter which was 28 in the previous quarter. The total revenues of Cable One, Inc. (NYSE:CABO) for the first quarter were $404.3 million compared to $421.9 million in the first quarter of 2023. The main cause of the decline is losses in video subscribers. While we acknowledge the potential of Cable One, Inc. (NYSE:CABO) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we discussed Cable One, Inc. (NYSE:CABO) and shared The London Company SMID Cap Strategy's views on the company. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.