AFTER-
HOURS
PRICE
AFTER
TALK:

3.01 

I need you to do something.  I need you to stick with...
Charter Communications Inc. (CHTR)...

I've liked CHTR since February, but the stock has been a woeful underperformer, causing me to question some of my conviction, as well as my sanity...

But then two things happened.

First, I went back to school, to Indiana University... and I picked up on something that Wall Street seems to have missed...

CMCSA and a little Midwestern cable company called Insight Media unwound a joint venture when I was in Indiana, giving CMCSA control of the assets in Illinois and Indiana.

I would not have given this story a second look, if I'd been at home, in the Wall Street bubble...

But, luckily, I was out in the real world.

Even though CMCSA and Insight didn't really put a total value on the deal, I did my own math, and I figured that they're valuing each cable subscriber at as much as $4583...

Enterprise value per subscriber is what's called the 'key metric' for cable.  Remember, in the book, we talk about finding the metric.  What drives the stock?...

It's enterprise value per person.  That's how we value cable.

What caught my eye about the unwinding of the Insight deal was how much CMCSA was willing to pay per subscriber...

And that's what brings us back to CHTR.

CHTR, right now, is only valued at $4017 per subscriber, 12% less than I think CMCSA valued its Insight media customers at...

If CMCSA is interested in Indiana and Illinois, why wouldn't it be interested in Missouri, where CHTR is based, although its best properties are in the much-coveted west coast...

They would fill in a big hole for CMCSA.  That would be what CMCSA wants...

.  .  .  .  .

Good.  But not enough for me to reiterate CHTR on Mad Money...

But then, the second shoe dropped...

CMCSA did another little deal.  They bought Patriot Media, a cable company in New Jersey.

In the Patriot Media deal, CMCSA paid $5,963 per subscriber!  Almost 50% more than where CHTR's currently valued!

That did it for me!  That was enough!

That made CHTR way too cheap, particularly because it's all the way back down...

If CMCSA is willing to pay such a high price for subscribers - maybe even subscribers that aren't as good as CHTR's - then CHTR not only deserves to trade higher...

I believe it will end up being acquired.

I am no longer worried about this stock, and I like it even more than I did when I first recommended it.

Brian Roberts (bull sound) - He's the CEO of CMCSA.  He understands that cable, with the rollout of the triple play, is the winner.

These subscribers are worth more and more money, because you can sell them internet access and phone service, plus all the new digital and on-demand television services.

.  .  .  .  .

Cable is beating the telco companies with their triple-play offerings, and the cable companies are worth, well... They're all worth more than we thought, because of these two deals that happened last week... that you're not focused on... that the Street's not focused on, but that I'm focused on...

Why?

Because the CEO of the biggest cable company in America is willing to pay a lot more for them.

Historically, the value of cable subscribers has never been higher, but I think it has a lot further to go...

We like CHTR because, in many ways, it's the worst of the cable companies...

Yeah, worst going to best.  We always love those stories on Mad Money...

You could buy CMCSA, and that'd be a nice, safe bet.  And I like the stock, but CHTR has much more upside!

Heavily indebted but, because of low interest rates, and an aggressive strategy of paying down that debt, they're locked into the positive virtuous circle of debt refinancing.

Remember, they can always just sell a big piece off too, and then pay down more debt.  That's another way for the company to win...

It was one of the initial reasons I got behind the stock, in addition to the rollout of the triple-play, which has been a gigantic win for the cable companies! ('mon-back sound)

But now we've got a new reason to like CHTR... It's 5.4 million cable subscribers, including those in fast-growing areas, California and Nevada - premium places that would go for a lot more a head than Indianapolis - are worth a lot more to the big dogs than we thought.

And, in light of that, CHTR is right.  CHTR could get a bid.

.  .  .  .  .

The bottom line!:    Please don't give up on CHTR.  We know that it's a dog (of a stock), but it's not Vonage the dog... And, with these two moves from CMCSA, I think CHTR's got a lot more upside than the Street is willing to acknowledge once again.