31 Flavors - The Communications Services Industry
There is something here for everyone. Pick your favorite flavor.
This is a strange mix of companies. Communication services is 7% of the S&P 500, but only 2-3% of the small cap value index. If you want, it is safe to ignore this industry sector.
There are a lot of complex companies to look at. Netflix has caused a lot of disruption that is only just starting. There are lots of bad balance sheets to deal with.
A young analyst could pick almost any one of these stocks and write a solid paragraph about why they recommend the stock. There is no right answer.
Here are my 31 ideas from best to worst.
I had investigated Verizon when I looked at high yield stocks. Selling at 9x, and a 6% yield, I just think Wall Street expectations are too low. I know T-Mobile is doing better in the short term, but I think VZ will win the long-term war for business/higher end customers. The real competition was for 2nd place:
Verizon - VZ - maybe not the long-term winner, but the valuation is just too low.
Cable One - CABO - A 2015 spin-off of Graham Holding/Washington Post. With operations in smaller cities and rural areas, I think they can buck many of the negative cable trends. Only 9x EV/EBITDA, and with a balance sheet that is tolerable.
Marcus Corp. - MCS - They are half theaters and half unique hotels. The hotel business is back to pre-pandemic levels, and theaters are back to 70%. The problem with theaters in the lack of movie supply. These guys are great operators and debt is back to about 2.5x a depressed EBITDA.
Ziff Davis - ZD - A unique company that has built a solid cash flowing media business with careful acquisitions. I think the term “long-term compounder” is overused, but these guys might qualify. They have cash and borrowing power. They completed a major spin-off of CCSI in 2021. Not real cheap, but a solid long-term story.
EchoStar - SATS - I have always been fatally attracted to making satellite companies work. Lots of asset value, but the path to profitability is very hazy, which is why the stocks is so cheap. They have a big launch in 2023. I wish I understood a little better how Musk’s satellites will compete.
John Wiley & Sons - Few things could be sleepier than this small educational publisher. Over 80% of the business is now digital. Maybe all that stored knowledge will be worth something in that magic world of AI. Stock sells for only 12x.
Madison Square Garden Sports - MSGS - The ultimate group of assets selling for $.50 cent on the dollar, but with with no path to cashing in. Maybe Mr. Dolan will be hit by a bus, but short of that, how will the value be recognized? The Knicks and the Rangers are unique assets. This stock presents a real puzzle for value investors.
Madison Square Garden Entertainment - MSGE - This is a confusing group of assets that will soon be separated into two companies. I will wait for the spin-off and focus on the Las Vegas assets.
Nextstar Media - NXST - I just hate to chase a stock that is up 20% this year. These guys are the smartest owners of local TV stations, and might be the smartest guys in the whole sector. There are plenty of complex issues about the future of local stations that I need to understand better. At only 8x earnings, you can argue this stock should be at the top of the list.
Omnicom - OMC - I wish I understood the effects of digital advertising a little better. Maybe too sensitive to the economy.
Paramount Global - PARA - I did plenty of Viacom work years ago. Maybe new management can make a difference. I will wait and see.
EW Scripps - SSP - A very complex combination of the ION network, and a group of smaller local stations. If the balance sheet were cleaner, I would dig in and do more work.
Lumen Technologies - LUMN - I weighted patiently for the dividend cut, and now I cannot pull the trigger. I was underwhelmed by the new CEO’s recent presentation. I know legendary value investor Mason Hawkins thinks the asset value is there, but so far I cannot find it yet. I want to believe, but the balance sheets hurts the risk/return.
Fox Corp. - FOX - It is hard to figure out the profitability of the sports business and the news business will be hared to grow. News Corp. is still looming, tricky situation.
Walt Disney - DIS - Maybe this is the world’s most straightforward restructuring play, but who will actually pay up for ESPN?
AT&T - T - Maybe their cost cutting will work. Dividend cuts are often good turnarounds. It is hard to be objective given all the past problems.
T-Mobile - TMUS - I just cannot pay 20x, no matter how good resent results are. I wish were a growth guy so I could own this.
Liberty Broadband - LBDRA - I want to be a John Malone backer, but I just cannot get excited about Charter.
Liberty SiriusXM - LSXMK - I like the product, but I can’t get excited about the stock. Not thrilled by the Howard Stern risk
Roblox - RBLX - Cathie Wood is not completely crazy. I love their investor day presentation. Certainly valuation is a major concern, but at some price there may be a real business here.
Townsquare Media - TSG - Tiny radio company with a few positives.
Gray Television - GTN - The balance is just too leveraged, but maybe the asset value is there to support it
DISH Network - I usually like asset value stocks, but the balance sheet is just too scary.
Sinclair Broadcast Group - SBGI - very complex with balance sheet problems
Alphabet - GOOG - If you actually read the 160 pages from the Justice Department, you begin to understand the secret sauce.
Meta Platforms - META - I certainly will not chase it now. Roblox did help me understand Metaverse a little bit better.
Snap - SNAP - maybe the biggest winner if TikToc is banned
Netflix - NFLX - A growth stock with real cash flow, just cannot pay 30+ times
earnings.
Millicom - TIGO - a buyer has emerged, so let’s wait. Neat story
Comcast - CMSCA - Never have been a fan, too much competition in the big markets
Charter - CHTR - same as Comcast