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Media is HOT.....Media is NOT......Hot!, Crap-o-meter!, Hot! My Dad's tougher than your dad!

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April 15, 2010 – Comments (17) | RELATED TICKERS: CMLS , GTN , NXST

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:

=====================================

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

.===============================

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.....

17 Comments – Post Your Own

#1) On April 15, 2010 at 8:15 PM, dragonLZ (99.42) wrote:

TSIF, first of all, let me tell you that I appreciate very much that you found the time to write about the best sector in today's investing world.

Before I answer why NXST didn't make my media stocks list, let me not forget to report that the portfolio of the 14 media stocks from the link above was up 1.7% today. Now, I know that's quite a drop from the 4-5-6% up-days we all got used to, but please keep in mind that S&P was up only 0.08% today.

With today's 1.7% gain, the portfolio of those 14 media stocks is now 61% higher than where it was on October 6, 2009 when I first reported MEDIA IS HOT.

So, who was today's best performer from that portfolio?

Lee Enterprises (LEE). Up 9.2% today.

Why I think that's worth mentioning?

Because on April 7 (6 trading days ago), I told the folks who are shorting LEE to be afraid...very afraid. Since that post, LEE is up 17%.

Now, I know you are wondering what is the point I'm trying to make with this? My point is: Media stocks are so predictable.

OK, let me now finally answer why NXST didn't make my media stocks list.

The answer is easy. I didn't like NXST's fundamentals. That's all.

TSIF, Thanks again, and Good Luck to all Media Lovers!    :)

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#2) On April 15, 2010 at 10:04 PM, TSIF (99.96) wrote:

Sorry DragonLZ, I don't buy your reason for why you didn't put NXST on your list.....    Please don't mix fundamentals with eye-chartery.   :)

As I surmised in my blog, there is no volume and current share price is already above pre-recession highs, meaning little potential for your potentiometer. 

PS, Do the math on NXST if you had added it to your list. While it didn't fit your criteria, I think you missed an opportunity.....I believe it blows away all of your picks??   As would almost any basket of 14 picks picked during that timeframe that had heavy debt.

Go Media Lovers and any lovers of any other stocks that took an uneven recession hit!  :) 

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#3) On April 15, 2010 at 10:26 PM, dragonLZ (99.42) wrote:

I believe it blows away all of your picks??   As would almost any basket of 14 picks picked during that timeframe that had heavy debt.

I hope you are not serious...

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#4) On April 16, 2010 at 9:36 AM, TSIF (99.96) wrote:

Should be two separate comments. My sentence does leave room for other interpretations:

"I believe it blows away all your picks":   Yes, do the math on NXST from your Oct 5th start date on your other media stocks.  It didn't meet your criteria, but it does blow away the other stocks that did.  As would many equities that don't fit your own model.  Nothing wrong with that, but it shows there are many models that work at a given time in the equities market.

"As would almost any basket of 14 picks picked during that timeframe that had heavy debt."

I believe that if you take a basket of 14 other equities in a sector, say retail or auto, or small banks, that were heavily in Debt before the recession started and compare them against the S&P that you'll find many combinations that blow out the S&P.   I did not mean that they would necessarily do any better than your media basket, but that the trend on these type of stocks does beat the S&P.  As you know by your retail and regional bank calls. 

Not sure if we can agree on the above, but I did NOT mean that your media picks were not great calls. I don't necessarily agree with you on why they were great calls, but the end result was that they beat the S&P.  My fundamental side needs more than your chart-ologoy, but I see some fundamental reasons why Mr. Market might reward these companies.    Not necesarily good investment reasons, not necessarily good fundamentals, but I do see why they did/are doing it.  I don't think it necessarily makes them good investments. The pullback if the market corrects will be much steeper, but if it doesn', then they look like a good ride.

I dont' know what the end result will be on these type of stocks, but I do believe that the crap can take time to be noticed.  There is the long view and the short view. UltraLong is looking at the long view. You claim to be, but you declare victory daily.  I know you are doing it in a fun-loving way, but not everyone relates that way.  Some crap will make good fertilizer, some crap will really stink in the summer sun.   One man's crap is another man's fertilizer.

Happy chartology! 

 

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#5) On April 16, 2010 at 10:30 AM, dragonLZ (99.42) wrote:

Yes, do the math on NXST from your Oct 5th start date on your other media stocks.  It didn't meet your criteria, but it does blow away the other stocks that did.

Have you done the math?

ETM  price on 10/5: $6.40   price yesterday: $15.75   Return: +146%

MNI  price on 10/5: $2.48   price yesterday: $6.04   Return: +143%

NXST  price on 10/5: $2.80   price yesterday: $6.74   Return: +140%

 

I used yesterday's prices to be fair as that's when you made the claim. With today's 9% jump, MNI would be kicking NXST's butt even more (as NXST is down 1% as of 10:30 AM).

Good Luck!  :)

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#6) On April 16, 2010 at 11:46 AM, TSIF (99.96) wrote:

NXST is within 10% of any of your hand picked basket of 14 stocks and is 40% higher than 60% of them. While you may have them on two of your "basket".... it blows away your portfolio average.

If it had been on a dart board, it could have been a good six month pick. :)

 

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#7) On April 16, 2010 at 12:17 PM, dragonLZ (99.42) wrote:

I guess you are right, Mr. Monday-Morning-Quarterback.  :)

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#8) On April 16, 2010 at 3:10 PM, TSIF (99.96) wrote:

MNI and LEE are holding tough in this selloff. Your basket of 14 seems to have a good risk/reward balance. Wait until Monday morning though....after everyone sleeps on GS and their infidelity!  :)    

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#9) On April 16, 2010 at 10:10 PM, dragonLZ (99.42) wrote:

This is my last comment in today's Media what are you smoking post:

 

WOW.

The market finishes down 1.7%, and media14 portfolio finishes up 0.6%.

Today's returns of the magic trio:

LEE +7.7%

MNI +7%

JRN +3.7%

p.s.  For what is worth, I think it's time to get into Media General (MEG), currently at $10.51.

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#10) On April 16, 2010 at 10:32 PM, TSIF (99.96) wrote:

MEG passed two of my criteria out the gate. I'll give this one a close look.   WE shold collaborate more often........ :)

Seriously...I'd consider screening some of your picks more formally for RL investements......short terms.... :)

 

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#11) On April 16, 2010 at 11:17 PM, dragonLZ (99.42) wrote:

See, everybody considers me a short term trader, but I think one would have better results with my picks if focused on the longer term.

Take the media portfolio for example: I picked it in October, but then it got killed in November. 

Six months later...

The problem is, not many people (a lot of times that includes myself) don't have a stomach for the short term volatility.

Anyhow, thanks for considering my picks as viable investing / speculative ideas.

Collaboration...you and I...hm...hm...

I though about that before, like maybe you and I starting a portfolio (something like these Tigerpack guys), but then I got discouraged when I noticed that quite a few picks that we share are not doing so well.

I was also concerned that our vastly different styles might create quite a bit of conflict between us as "partners".

Still,...maybe that's something we should think about...

p.s.

MEG has been bouncing around $10 for 7-8 months now. That's not gonna be the case for ever. I say this as MEG (just like LEE and JRN) fits my eleven twenty-one criteria, which btw. has been working for me like a charm lately...

Good Luck!

 

p.s. 2

If we start a "fund", what I see as a possible conflict right off the bat is deciding what should be our advertising punchline:

The Sky Isn't Falling, unless you invest with us...

or

We'll burn your cash with dragon's breath...

:)  

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#12) On April 17, 2010 at 9:49 AM, TSIF (99.96) wrote:

I don't see you as a short term trader.....I said I would invest in some of your moves short terms.  Not to mean that they will collapse at any point, but that there would most likely be other candidates with more upside potential.  After all, we only have limited resources.  Even though we'd be making it pretty fast, I suspect our wives could spend it faster, so we'd have to turn something over to buy something else.

Second, we would need to be open to new opportunities and  some diversification.

Much of CAPs may see you as a short term trader. You make tons of short term broadcasts, predictions, pat on the backs, etc on what you are calling your long term calls....you have to admit, it could be a little confusing??? :)

I certainly see that you consider your picks long.  I see that chartwise, depending on the economy that they should have 12-18 months left before topping and getting too boring.  The fun and larger payback is in the chases!

At any rate, not sure how it would work either.....other than like I do now... my cribbing your picks, running them through my processor and placing my own bets with some time delay.   

I lose track of where I cribbed picks, but PNX and CNO are still alive and well in my portfolio. I think I had them before you, but I'm too lazy to check. CNO has gotten quite a bit of blogging.   GTN never made ti there, but could have.  I don't churn that much either. 

IF the SKY doesn't Fall Today, and if the Dragon doesn't burn all the cash, then we'll send you a Christmas Card every year, (or whatever holiday you celebrate) thanking you for the commissions.  

Heck, in 2012 the world may end.....we'd just be doing you a favor relieving you of the worries on what to do with your money until then. 

 

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#13) On April 18, 2010 at 12:27 AM, dragonLZ (99.42) wrote:

Even though we'd be making it pretty fast, I suspect our wives could spend it faster, so we'd have to turn something over to buy something else.

I don't know about your wife, but mine would be a perfect candidate to work for the government. She is already spending our 2012 salaries. 

Much of CAPs may see you as a short term trader. You make tons of short term broadcasts, predictions, pat on the backs, etc on what you are calling your long term calls....you have to admit, it could be a little confusing??? :)

I agree. I will try to stop with my "look at me posts" for a while (but will continue posting my experiments - have 2 new ones in mind already).

At any rate, not sure how it would work either.....other than like I do now... my cribbing your picks, running them through my processor and placing my own bets with some time delay. 

FWIW, after doing some "research" today, I'm adding ABCB into my currently-favorite-stocks list.

I lose track of where I cribbed picks, but PNX and CNO are still alive and well in my portfolio. I think I had them before you, but I'm too lazy to check.   

What are you talking about? You closed both CNO and PNX (and MNI btw.).

I do remember you picked PNX first (and I do remember you said in your pitch you'll even throw some real coin at it).

However, CNO, with MNI and BPOP, was one of the 3 speculative picks you entered after my Volume Story (and you mentioned my name in your pitches for all 3).

IF the SKY doesn't Fall Today, and if the Dragon doesn't burn all the cash, then we'll send you a Christmas Card every year, (or whatever holiday you celebrate) thanking you for the commissions. 

I think we should be very careful with commissions. They should be no more than 10 to 15% of the money people invest in our fund. That way if the people start complaining about the returns of our fund, we can then tell them "We perform the way you pay us. Poorly." After that, I'm sure they will voluntarily start paying 30-40% commissions, and won't ever be able to blame us for the increase.

As you can see, I though of everything. Let me know when you think we should start...

Good Luck!

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#14) On April 18, 2010 at 1:13 PM, TSIF (99.96) wrote:

I lose track of where I cribbed picks, but PNX and CNO are still alive and well in my portfolio. I think I had them before you, but I'm too lazy to check.   

What are you talking about? You closed both CNO and PNX (and MNI btw.).

CNO is in my real life Portfolio:       Currently up 25.15%

PNX is in my real life Portfoio:      Currently up 46.82%

I never played MNI in RL. 

CAPs is a game with strange rules, 7 day holds and needs to beat the S&P.    Real Life has no hold rules, and UP is UP. It's nice to beat the S&P, but the goal is never lose the money!  :)

Wish I was better at that one!!!  :)

I think my FOOL timing and my RL timing were pretty close, so yes, I think CNO started in your camp and through the mill.

-tsif

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#15) On April 19, 2010 at 11:15 PM, jdlech (< 20) wrote:

Two children overheard at a playground

"My dad can beat up your dad".

"My mom could beat your mom".

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#16) On April 20, 2010 at 1:30 AM, TSIF (99.96) wrote:

"My Mom could beat your Dad".....

Now that's a cocky kid or a "mean momma".  :)

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#17) On April 20, 2010 at 3:39 PM, dragonLZ (99.42) wrote:

I said I will try to minimize my media posts, and I think I'm doing that. Yesterday, I had no posts on media.

However, today I had the love story.

Tomorrow, I'll try to keep quiet again.

p.s. It's like a drug...

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