(FORTUNE Magazine) – The long-running joke about Hughes Electronics (HS, $17), owner of DirecTV, the country's largest satellite-TV service, with 12 million subscribers, was that it was lost in space. Formed in 1932 to build experimental airplanes for its founder, eccentric wunderkind Howard Hughes, the company pioneered the development of technology that enabled everything from communications satellites to lunar landings before getting into the TV business. But since 1985 Hughes has been controlled by General Motors, which had little clue about how to run a media company. Plagued by high customer turnover, Hughes has struggled to break even.

In the wake of News Corp.'s $6.6 billion purchase of a controlling stake in Hughes in December, however, a number of top value investors, including Bill Fries at Thornburg Value and Bill Nygren at Oakmark, are betting that Rupert Murdoch will unlock the company's true potential. The media mogul has transferred control of Hughes to his Fox Entertainment unit and plans to revamp DirecTV in much the way he did BskyB, News Corp.'s satellite-broadcasting affiliate in Britain. By adding new interactive features that let viewers, say, vote for their favorite contestant on American Idol or select their favorite camera angle while watching sports, he hopes to add roughly a million new subscribers a year for the next several years.

Trading for a stratopheric 76 times this year's estimated earnings, Hughes shares appear to have already achieved zero gravity. But Bill Jacobs, an analyst for Chicago-based Harris Associates, which runs the Oakmark fund, says a better way to value Hughes is on a per-subscriber basis. He says Hughes's DirecTV subscribers are valued at about $1,500 each, less than half the average for big cable-TV providers. Part of the discount is justified, he says, because satellite companies must pay more to gain new viewers and haven't been able to offer services such as high-speed Internet connections successfully. "But we don't think it deserves a 50% discount," he says. Fries figures the stock is worth $21 a share. --David Stires