The New CBS Storms Out of the Gate

Weighing the relative merits of two newly minted and much-discussed stocks Tuesday, Wall Street came to a surprising conclusion: Buy 'em both.

After months of preparation, Sumner Redstone's mighty conglomerate formally split into its CBS (CBS Quote) and Viacom (VIA Quote) halves Tuesday. Holders of the old Viacom got half a share of each newly independent company. The split left media investors with a new question: which stock to buy?

Given its many promising properties, Tom Freston's new Viacom has been deemed the obvious choice by some hard-charging growth-oriented investors. But for one day at least, Les Moonves' cash cow CBS operation held its own.

On Tuesday, the first day of trading for the two spinoffs of the New York-based conglomerate, CBS rose 3% to $26.24, while Viacom soared 4% to $41.73.

Figuring where to place one's bet is hardly simple. On the one hand, there's Freston and his fast-growing MTV side of the business. Just last month it agreed to acquire the live-action studio Dreamworks SKG in a deal that will give it the right to distribute sibling Dreamworks Animation's (DWA Quote) beloved cartoon movies.

But investors banking on mighty Freston must consider whether they really want to bet against canny CBS chief Les Moonves. His value-oriented side of the business continues to spin off mighty amounts of cash through its TV operations, newly rebranded CBS radio and outdoor business. Moreover, rumblings in the market suggest CBS leaders have no intention of sitting around as a boring value play. If a November investment in college sports network CSTV is any indication, the company still intends to keep expanding.

Prudential, initiating coverage on the newly separated companies, pointed to Viacom's hefty multiple in leaning toward the Black Rock. The firm put an overweight rating on CBS with a $30 target and a neutral weight rating on Viacom with a $42 target.