What 5 Stock Pros Have in Common: TCI Holdings

A roster of 15 independent-minded stock pros shouldn’t be able to agree on much of anything, but a surprisingly large number of fund managers at the Morningstar conference have made big bets on the future of cable TV.

Shares of the 700-pound gorilla of the cable industry, Tele-Communications Inc., are a significant holding in the portfolios of five of the 15 highly rated U.S. stock fund managers who spoke at the Morningstar show.

And, interestingly, TCI’s fans include both “growth” managers, such as the Milwaukee-based Strong Opportunity Fund, and “value” managers, such as the Los Angeles-based Clipper Fund and the Weitz Value Fund of Omaha.

Normally, the growth camp and the value camp don’t see eye to eye on anything. Growth managers typically chase fast-growing companies whose stocks sell at high price-to-earnings ratios. Value managers usually hunt for firms whose stocks don’t reflect the true worth of their assets.

TCI, the nation’s No. 1 cable firm and the leading technological innovator in the field, seems to meet both camps’ criteria by virtue of its huge base of assets--the firm reaches 10.3 million households--and its growth prospects as cable TV enters the interactive age.

Robert Sanborn, manager of the Chicago-based Oakmark Fund, a value-oriented stock fund that gained 49% in 1992 and is up 10% year-to-date, said he views cable TV as the most exciting business in America today.

“Increasingly, I find people just want to hole up in their homes. It’s disturbing, but it’s reality,” Sanborn said. So an investment in cable just plays on an already powerful demographic trend, he said--not to mention the coming interactive technology that will bring a vast array of new programming and services to cable users.

But TCI, at $23.625 a share Friday on NASDAQ, has rallied strongly in recent weeks and is approaching its previous all-time high of $25.50 a share, reached earlier this year. Because the firm is still run mostly for cash flow rather than real earnings, even some of its biggest fans are reluctant to buy more shares at the current price.

“For the stock to really come up from here, it’s going to have to become an institutional favorite,” said Wallace Weitz of Weitz Value Fund. Plenty of managers already own TCI, of course, but their ranks will have to balloon to send the stock sharply higher in the near term, Weitz said.

While that could happen, Weitz sees more immediate value in Los Angeles-based Falcon Cable Systems, which owns cable franchises in California and Oregon.

Falcon is a limited partnership that must be dissolved by 1997. While the stock now sells for $10.50 a share on the American Stock Exchange, Weitz believes that is far below the price the assets will fetch in the eventual liquidation.

“We see the value somewhere between the high teens and $30 a share,” he said. But Weitz, a student of famed investor Warren Buffett, cautions that Falcon is only for the patient investor.