Let’s face it: Cable stinks!

I have yet to find a raving fan of a cable provider’s service, regardless of who provides it. And I’m not surprised. People want freedom and choice, and the current cable company business model doesn’t allow for much of that.

Heck, according to recent customer satisfaction score, cable TV providers are rated worse than airlines.

The cable TV business model generally works like this: The consumer has to pay a rental fee on a low-cost box, as well as a monthly fee for a bundle of channels they can’t break apart, and many of which they won’t watch. The cable company will provide you a “discount” if you include Internet and phone as well, locking you into increased rates and ever-complex bills.

The real kicker is every few years, for the content that you actually watch and care about; they will get in a huge fight with the content providers, place you as the consumer in the middle and threaten to cut it off until they get their way. Lovely.

But as an investor, I look at this and see huge opportunities for change, and therefore profits.

Specifically, I see three basic ways that investors can profit from the changes going on in the cable industry: buy the companies that are doing the buying, buy the potential targets or shun them both and buy the disrupters. Each has certain advantages and risks. Let’s look at a few stocks to buy of each type right now.

Buy the Consolidators (TWC, CMCSA, CHTR)

If you’re eying stocks to buy within the cable industry, companies who are looking to consolidate the cable industry are a bet that any larger fish will be able to drive efficiency and either stabilize or increase the subscription base.

The biggest consolidation transaction happening right now is the proposed merger between Comcast Corporation (CMCSA) and Time Warner Cable Inc (TWC). The $45 billion merger is under review by the Federal Communications Commission and might be impacted by recent comments by President Obama on net neutrality.

Still, the deal is expected to generate $1.5 billion in synergies, and if completed will create a powerhouse within the industry.

Another consolidator worth a look and is also benefiting from the Comcast/Time-Warner merger is Charter Communications, Inc. (CHTR), which is buying 1.4 million subscribers from Time Warner and getting a 33% stake in a soon-to-be created new public company in a joint venture with Comcast.

Buy the Targets (CVC)

If you don’t think buying industry consolidators will pay off, then perhaps you should go after a guppy that could be swallowed up instead.

One of the best stocks to buy on this front — as it’s frequently talked about as a potential acquisition target — is Cablevison Systems Corporation (CVC).

Cablevision is closely held by the Dolan family, which has tried to take the company private several times in the last decade. Although the Dolan family has been reluctant to sell previously, with the recent wave of consolidation and the move of content providers to circumvent cable providers and go directly to consumers via the web, this reluctance may be fading.

Buy the Disrupters (T)

If you think that all cable operators, regardless of position in the industry are on the way out, then bet on the disrupters.

DirectTV (DTV) shareholders have accepted AT&T Inc.’s (T) $49 billion bid and are now waiting for Department of Justice and Federal Communications Commission approval. A combined AT&T/DirectTV deal is anticipated to close in April and will allow both companies to offer bundled high-speed Internet, cable and mobile services to their respective customer bases.

Assuming the acquisition is approved by regulators, than investors would be able to get cash and anywhere between 1.724 to 1.905 AT&T shares, depending on AT&T’s final stock price.

As I recently noted, AT&T is a stock that is worth holding in your portfolio, and as the benefit of the DirectTV merger becomes realized, a re-evaluation of AT&T stock might be warranted. AT&T stock might just go from an income play to a growth and income play in the near future.

Another great disrupter in the cable industry is the Dish Network Corp (DISH). Once thought to be a better fit for an AT&T acquisition than DirectTV due to its cache of owned spectrum, DISH stock could both be a potential acquisition target for a consolidator or could start down the path of acquiring a wireless service provider to offer bundled service to its customer base, just as AT&T and DirectTV plan to do.

With a current price to earnings ratio of almost 30, you would have to be pretty confident on Dish Network executing perfectly over the next few years to make it worth buying, which I think is unlikely so for now. Personally, I would avoid DISH Stock.

As of this writing, Kenneth Fick did not hold a position in any of the aforementioned securities. Write him at kfick@piercethefog.com or follow him on his blog at www.piercethefog.com.