Reflections – attempts to understand Comcast Corp (CMCSA)

For the past week, on top of my busy workload (which explains the lack of content), I’ve been working on trying to understand Comcast Corp’s (CMCSA’s) business. I was mainly curious to see how a competitor of Disney Inc (DIS) was doing and whether it was a company that I would be interested to initiate a position in.

Previously when I initiated a position in DIS I was still relatively naive in my analysis and actually, upon further evaluation, failed to fully comprehend some aspects of the business dynamics. Although I still believe in the strong prospects of DIS, I thought that maybe an analysis into CMCSA as a competitor of DIS may give me a greater understanding of the sector. Perhaps my newer knowledge on business evaluation may give me more insights into the sector and of the competitors that I wasn’t able to fully comprehend.

There were however many problems in trying to understand the business. The most significant being my failure to understand the exact sectors/areas that CMCSA derive their revenues (especially since CMCSA is a huge multi-billion dollar business). It took me long hours of reading the annual reports and researching to help me understand this point (such as revenue from cable subscription, broadcast TV, advertising, internet etc). This difficulty was further compounded by me not being a consumer for most of their products (Xfinity and NBCuniversal were very unfamiliar to me).

As a result of these difficulties, I have terminated (postponed) the project for now with the below calculations. Please understand that given my ignorance about the business and sector, I may not have properly represented all the significant competitors of CMCSA in the table.

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Perhaps one important lesson from this whole fiasco is to never invest in businesses that I cannot fully comprehend yet. As mentioned previously, I do not consume most of CMCSA’s products and I hardly even watch television these days, which resulted in me having huge difficulty trying to understand the specific area of competition between CMCSA and its competitors. Many top investors (including the legendary Warren Buffett) has constantly warned investors of not investing in businesses that they cannot understand and only now can I fully grasp the weight of that message.

For now, before I can better comprehend the sector, I shall be moving on to businesses in areas that I am much more familiar with.

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