Spanish Broadcasting System, Inc. (SBSA)

October 7, 2007

There's a lot of factors that go into predicting what will happen to Hispanic driven markets in the U.S. Obviously, one factor is what is going to happen to the Hispanics that are here illegally. So , I'll address that. Well, I don't think they are just going to all start hitchhiking back to Mexico. So you can probably forget about that or any kind of unrealistic mass deportation. I think the real question here is spending power. What kind of spending power overall does the poorer section of the Hispanic community have? I have heard it argued that with lower paying jobs there is not the kind of spending power to purchase such things as Spanish Broadcast Television. I disagree. The Mexicans and other Hispanics that I have known will often go in together and pool money to rent nicer apartments or homes etc. And the Television is still a centerpiece of the American experience. Even the most poorly furnished home still seems to be able to have a TV set. Even with no couch, sofa, or love seat, there is always a TV set. So I think that the argument against purchasing power is chiefly mute. It would seem to be insulting to suggest that the Hispanics are less resourceful. Actually they tend to be more so. They are tighter knit and strong on family. So... I don't know where i saw it or heard it but I oppose the argument of less purchase power.

So lets get into what matters. Finances and facts.

I'll just do this in no certain order. I would argue that this stock is currently, as I write, undervalued. As I said, no certain order here.

1. Its book value is at $5 per share. It is trading at $2.55 (this alone means nothing of course)
2. While profit is currently at a negative 1+%, they are striking deals for braodacsting (i.e. Intelsat). And I would expect profit to rise in the near future.
3. Some of the major holders include Vanguard, Goldman Sachs, and Lehman Brothers
4. GROSS profit is actually the highest it has been in awhile.
5. The amount of liabilities has decreased
6. The Hispanic population is on the INCREASE
7. Hispanic market is the hugest growing market in the U.S. and this is especially reflected in the recording industry where Latin music sales are going nuts.
8. The EPS trend is expected to go up in 2008
(which makes now a good time to buy. In a matter of weeks this could easily go to at least slightly below its book value.)
9. Market targets are the largest Latin population cities
10. Return on assets is positive.

Its short percent of float will tend to make it rise fast once it starts going as well. There's no doubt in my mind that the price is depressed, rightly or not. It will go up. In the short term (year or less this could be a 1-bagger, in the long term, if it is run a bit more efficiently as a company (and it does have its faults) over the long term, this COULD be a triple bagger. That is to say, double your money plus. It has the potential.

Personally, I wouldn't overload on it, but it is a good one to have in the portfolio, in my foolish opinion.