Tuned to Cablevision

Cablevision Systems (CVC ) has been a loser all year, tumbling from 75 in mid-January to a low of 33 on Nov. 2. That was about when some hedge funds started buying, pushing CVC up to 37 by Nov. 20. Behind the uptick: Some say it was ripe for a turnaround on fundamental and technical grounds. Others see Cablevision as buyout bait--worth $10.6 billion, or $60 a share. A cable operator in seven states, Cablevision owns several cable-TV networks, including Bravo, American Movie Classics, and sports channels, through its Rainbow Media Group unit. It also owns Madison Square Garden, Radio City, and retailer the Wiz.

If Cablevision's stock breaks 38, it will be the first time in eight months that CVC has climbed above its 10-month trading range. "It would be the first positive sign that the stock is bottoming and on its way up," says Andrew Addison of Addison Investment Management. In fundamentals, the outlook is similar: Cablevision's business has "reached its low-water mark, and it's at a turning point toward stronger operating performance in the next 12 to 24 months," says analyst Lara Warner of Lehman Brothers. She rates the stock a buy, with a 12-month target of 45, based on a sum-of-the-parts valuation.

A global money manager with close ties to Cablevision says she's been buying Cablevision shares for just one reason: takeover appeal. This pro says a major U.S. media company and a European conglomerate are "pursuing" Cablevision, whose cable-TV and other media assets would fit well with theirs. Analyst Robert Rout of Arnhold & S. Bleichroeder says there are plenty of buyers for Cablevision's "attractive assets." Although he's unaware of any possible deal, Rout says in a buyout, Cablevision is worth 81 to 91 a share. Cablevision declined comment as a matter of policy.

By Gene G. Marcial

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