Friday, June 09, 2006

Notablecalls paperstand

For Tribune, A Breakup Offers No Guarantees - WSJ Heard on the Street
Since Tribune (TRB) unveiled plans for a $2bn stock buyback last week, the stock price has jumped 13%. But investors believe a more radical restructuring could lift the stock another 42%, mainly because separating the parts would make it easier for buyers to snap up TV stations and possibly its newspapers. Analysts at Ariel Capital, one of Tribune's biggest shareholders, figure that Tribune shares would be worth $44-46 a share in a breakup. "Recent M&A transactions have shown that buyers still place a high value on quality media properties such as those owned by Tribune," said Charles Bobrinskoy, vice chmn of Ariel, which owns 10.3m shares. The hope of such a share-price jump is likely what's driving Tribune's board to weigh a TV spinoff. But recent media-company restructurings have shown there is no guarantee a breakup will produce a higher stock price. Witness Viacom (VIA), which at the start of this year divided its broadcast-TV and radio assets from its cable channels and movie studio, in hopes of generating higher returns for investors. 6mo after the breakup, shares of CBS (CBS) are little changed, while shares of Viacom, which was billed as a "high-growth" company in the runup to the separation, have dipped 15%. We like the idea of having businesses track more as pure plays, but there are current examples out there, including Viacom, where investors continue to price shares below the private mkt value," says Bill Nygren, portfolio manager at Oakmark Funds.

Notablecalls: When you are a fund manager holding 10.3 million shares, you never say stock may fall or even stay in a close range. It always goes up, and fast. It is unlikely that The WSJ article moves the stock much, but article has its point.

Barron’s Online pushes two biotechs
Barron’s Online pushes today Amgen (AMGN) and Gilead (GILD), sayig that despite their reputation for volatility, leading biotech stocks these days aren't quite as risky or as expensive as many might fear. "We've been overweight in the space for the last 30 days," says David Heupel, portfolio manager for the Thrivent Large-Cap Growth Fund. "We have seen irrational selling. The fundamentals for several co’s remain as good as we have seen them. And you can buy some high-quality stocks at decent valuations." Profits from Big Biotech could rise as much as 20% annually for the next 3 years, says Eric Strange, manager of the Fifth Third Quality Growth Fund. And while the stocks still trade at premiums to the S&P500, their forward P/E have contracted significantly, and many trade at 5-year lows. "There is stability in these co’s," says Strange. "They have revs and earnings. They still have some exciting drugs in the pipeline, so they aren't boring. And with the pullback, valuations are cheap."

Notablecalls: Barron’s is not the best picker of biotech stocks.

No comments: