Thursday, September 21, 2006


Barron's Online highlights Time Warner (TWX), saying that the co's stock is up only 5.7% over the past 2 years, making it the very definition of dead money. The shares have lagged all their big media peers: News Corp. is up 20.2%, while Disney and CBS are each up 30.8% and 8.6%, respectively in the same time period. At $17.60, Time Warner shares are cheaper than many peers. As a multiple of its operating earnings, a popular measure with media investors, Time Warner trades at just 7.3x next year's expected results, vs an industry average of 9x. Most of the bad news about America Online, a ball and chain around the co for years, may be fully discounted in the stock at this point. And other parts of the co's business could see some meaningful improvements next year. And the introduction next year of a separate stock for Time Warner Cable, could be a boon. That unit may be worth $50bn on its own, according to analysts, but Comcast, its bigger rival, has seen its shares rise 33% this year while Time Warner shares haven't risen at all. All that could help Time Warner shares rise 20% or more to the low $20s a share, with or without dramatic synergies."We like Time Warner b/c it is selling at a discount to pure distribution co's, like Comcast, when in fact most content co's, such as Disney, traditionally should get a premium," says Bill Nygren, a portfolio manager for the Oakmark Fund and Oakmark Select Fund. "I don't think that the content assets at Time Warner are worth less than the assets of the other media co's, and on top of that, you're getting an option on improved performance at America Online," says Nygren.

"Inside Scoop" section reports that shares of Eagle Materials (EXP) have tumbled 14% over the last year, but the Chmn Laurence Hirsch of the co has recently bought $14.1m in shares. Despite his 20-year involvement with the co, Hirsch's $14m investment is the first open-mkt purchase he has made of Eagle shares, notes Ben Silverman, of "[Hirsch] is certainly somebody who has a pretty good idea of how the home-building and materials cycle rolls," Silverman says. "I think considering where the stock was back in April, and the earnings and guidance [Eagle] put out, he really felt that the stock was just oversold."

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