It seems like every second of airtime and every square inch of newspaper is jam packed with campaign messages and updates on the election. I know you’re probably feeling just as bombarded as I am, so today I’m going to give you a break from politics. (For those of you itching for even more election coverage, not to worry—I’ll check back in tomorrow as soon as we get the results from the General Election).
In the meantime, I actually want to redirect our attention to the media itself and whether there are any viable investing opportunities in this sector. Many of us are familiar with the major web, print and broadcast players in the U.S.—Fox News, CNN NBC, The Wall Street Journal, The New York Times, but fewer understand which conglomerates are responsible for which media outlets. So let’s go ahead and assess the profit potential of several of the largest media groups in the country:
|Company||Ticker||Owns||Recommendation||Quantitative Grade||Fundamental Grade|
|Comcast Corp.||CMCSA||National Broadcasting Co. (NBC) (partially)||Strong Buy||A||B|
|Gannett Company Inc.||GCI||USA Today||Buy||A||B|
|General Electric||GE||National Broadcasting Co. (NBC) (partially)||Buy||B||C|
|News Corp.||NWSA||Fox Broadcasting Co. and The Wall Street Journal||Buy||A||D|
|The New York Times Company||NYT||The New York Times, The Boston Globe and the International Herald Tribune.||Hold||C||C|
|Thomson Reuters Corp.||TRI||Reuters||Sell||D||C|
|Time Warner Inc.||TWX||Cable News Network (CNN)||Buy||B||C|
|Walt Disney Co.||DIS||American Broadcasting Co. (ABC)||Buy||A||B|
Of course, if you want to know my opinion, the biggest profit opportunities in media aren’t with these huge conglomerates but rather with a handle of smaller and more nimble regional players—in particular, LIN TV Corp. (TVL) and The McClatchy Company (MNI). Both of these companies were strong enough to survive the shakeup as subscribers demanded more internet-based options from both newspapers and news channels.
In the case of Lin TV Corp., this company operates upwards of 40 televisions stations nationwide as well as a few dozen news sites and mobile products. Because this company has so effortlessly made the transition to web, it is headed towards 27% sales growth and a whopping 467% earnings growth this quarter. In fact, the only real area for improvement for Lin TV is its return on equity. TVL is currently a strong buy.
As for The McClatchy Co., this is a American publishing company that runs 30 daily newspapers across 15 states—including The Sacramento Bee. This company has also embraced digital media as it also operates several websites and mobile news applications. On top of this, it also owns a minority state in CareerBuilder LLC—the operator of CareerBuilder.com. This diversified news company outperforms the industry average in terms of earnings growth, long-term growth rate and return on equity. MNI is also a strong buy.
So as with many things, when it comes to investing in media plays, bigger isn’t always better.