Media is HOT.....Media is NOT......Hot!, Crap-o-meter!, Hot! My Dad's tougher than your dad!
April 15, 2010
– Comments (17) |
RELATED TICKERS: NXST
, CMLS
, GTN
Okay Children, you know who I'm talking about.
As with any sector, there is HOT, and there is NOT. Well, maybe it's not that dominant in either direction. The entire market is a bit insane. Those that LOST the most are tempting targets for both speculators and investors. Past performance is no guarantee of future gains. The market knows something. For just $19.99 you can have not one, but two Sham-Wows...But wait their's more......Is Hot...Is NOT!
Didn't FloridaBuilder teach us anything? In most business's some will survive. I just pitched NXST, Nexstar BroadCasting group. It isn't on DragonLZ's 14 best, but he couldn't resist UltraLong's pitch on GTN.
I'll call it NXST neutral ground, but I'll stand by my earlier lessons I've given myself on reflection:
1. IN any Debt laden industry the market reaction to the crash was strongest as many feared that the dry up of liquidity would push companies with high debt into bankruptcy. In actuality this has rarely happened because;
2. NO investor wants to own the dead shell of a company that appears to be insolvant and has negative book value.
3. In general, while Media Companies are HIGHLY leveraged, most have managed to pull off positive cash flow and have paid down debt. Debt holders have been willing to hold any reaction that might leave them worse off. If you look at the charts, MANY have had negative net tangibles for years and have survived just fine.
Media has some unique issues, however, that should be a concern.
1. People have forgotten how to read, or can't be bothered.
2. People expect to get their news for FREE over the internet.
3. Apathy, recessions, and pessimism aren't good for news.Overall, advertising dollars are DOWN, but there is some hope in the upcoming political cycle that ad spending and liquer will flow freely.
My biggest concern with Media, in general, is that they achieved some gains by severe cost cutting. What happens when you cut your costs to a certain level? You don't maintain your capital equipment, your name recognition, your sales force, or your best assets, your people.
Media hasn't held a strong hand, especially print media in several years, dynamics are chaning.
The Recession just fueled the concerns.In my pitch on what appears to be neutral ground for the polar opposits on this topic, NXST, I chirped:
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Ultralong's "crap-o-meter" spun out several media stocks this week. There seems to be a strong BIOS "in favor" (aka -- DragonLZ) or Against Media (aka - 90% of the world's population). Overall, I tend to see myself as Media Neutral. Kind of like FloridaBuilder with his homebuilders, I tend to think the good (well, the not as bad) will prevail.
As part of my media neutral philosophy I've upthumbed GTN and TVL a few times. I'll take a pass on some of the others that spun out of the crap-o-meter, but I'll join UltraLong on his Nexstar Broadcasting Group, INC call. ......
I noticed one little risk for my downthumb call....volume....Nexstar has NONE. I tend to avoid these as insiders or a single rogue mutual fund can tip the scales on an equity with ultra-low volume. All, in all, however, things tend to equalize over time.
Nexstar has been gaining share price due to rolling out announcements about debt restructuring. Overall, unlike some of the other media stocks, they have made no headway in reducing that debt and carrying charges continue to mount with each new "agreement" and less is left for the stockholders. Not only is Nexstar pushing a 52 week high, they only traded above this level for about a year from Jan '07 to March '08. Their balance sheet has remained relatively steady at a NEGATIVE $500 Million Net Tangible Assets. Income really hasn't varied, they have LOST money consistantly the last three years. Negative margins, negative book value of $6 per share, and debt rising slightly, but interest rising.
I don't see any amount of cost cutting or political advertising that makes this company worth more than $2-3 per share, even in the fixated over valued exhuberant world we live in. Low in the last 52 weeks was $0.57, which still seems generous to me. Valuing media stocks is tricky. Lots of debt, but usually good cash flow. In this case, however, I see no positive "news" coming from this one. Mr. Market and the low volume can't continue driving this one higher
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I don't think NXST made DragonLZ's list because it was NEVER a high flyer and volume, even on an upday is VERY light.
Whether Media in general glides upward with the rest of the market, or whether it starts showing some resistance, I really can't say. I would tend to avoid downthumbing an equity that is paying down debt. I think there are good and bad in any industry, although at times, there may not be any "good" that fit your own metrics in a given industry. Back to washing the car...these Sham-Wow's are GREAT!
TSIF, The Sky isn't Falling Today, but some media companies are getting a little overfilled with helium.....
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