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Cable Stocks Ride M&A Wave

With just 10 days left in the year and the Dow Jones Industrial Average inching toward a record 20,000 points, cable distribution stocks were a good place to be in 2016, with the sector up nearly 40%.

A Dow 20,000 has been a possibility for days—the index was at 19,919.73, down 22 points at 10:45 a.m. on Dec. 22. The market barometer has gained more than 4,000 points in the past 12 months.

With consolidation on every cable investor's mind in the wake of Charter Communications’ $80 billion purchase of Time Warner Cable on May 18, it was no surprise that the two best performers in the sector were Charter—up 43.8%, or $88.74 per share to $291.24 on Dec. 21—and Cable One, up 43.9%, or $190.21 per share to $623.87 each on Dec. 21. Cable One, which has switched its focus from video to broadband—it has lost about 20% of its video customer base in the past two years—is generally thought to be a prime takeover target in the coming months. But so far, no one has pulled the trigger on a deal.

Comcast, which agreed to purchase content company DreamWorks Animation earlier in the year for about $3.8 billion, rose 25.5% ($14.40 each) between Dec. 31, 2015 and Dec. 21, 2016, mainly on strong execution. The cable operator is expected to report its first full year of basic video customer growth in ten years in 2016.

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