How More Media Companies Brave the Headwinds

On Friday I published Part 1 of this two-part series recapping the UBS Media Conference. The main message coming out of the conference was that advertising continues to deteriorate and that visibility into 2009 is minimal. This means that for most media companies, the risk remains to the downside for earnings estimates.

Part 1 contained positive reviews of Time Warner (TWX - commentary - Cramer's Take) and Discovery Communications (DISCA - commentary - Cramer's Take), both of which I am long. Neither company's presentation was earth-shattering, and both indicated that business has slowed further recently, but the bigger picture driving the shares to the top of my media buy list was on display.

I also reviewed Gannett (GCI - commentary - Cramer's Take), which remains in a very troubled situation because of the collapse of newspaper industry on a secular basis while cyclical headwinds are blowing at full force.

Today I'll recap presentations by Liberty Global (LBTYA - commentary - Cramer's Take) and Scripps Networks Interactive (SNI - commentary - Cramer's Take), along with the analyst meeting for Dreamworks Animation (DWA - commentary - Cramer's Take) that took place Thursday in New York, conveniently for everyone who was in town for the UBS Conference.

Liberty Global is one of the largest cable companies in the world. Its operations are focused primarily on Europe, with a large presence in Japan, Chile and Australia. The stock has gotten killed as the company has fairly high leverage and lots of exposure to the hated Europe, and it is feeling competitive pressures on the subscriber front. I believe this is a bit overdone, partially because investors don't see Liberty Global as a European Comcast (CMCSA - commentary - Cramer's Take) with similar defensive characteristics. There is also a lack of appreciation for Liberty's exposure to the even more hated Central and Eastern Europe, where a real growth opportunity exists.

My biggest takeaway from Liberty's presentation was how management refused to comply with conventional wisdom. Instead, it talked about not hoarding cash, continuing to buy back stock and making tuck-in and distressed acquisitions. This is par for the course for an always aggressive management team. It's a gamble if the economy stays down forever, but if a recovery gets under way within a year or two, the stock will be super-leveraged for upside.

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At time of publication, Birenberg held TWX, DISCA and DWA in client acocunts and held TWX, DISCA, DWA and LBTYA are held in personal accounts., although holdings can change at any time.

Steven Birenberg is president and chief investment officer of Northlake Capital Management, LLC. Northlake specializes in managing equity portfolios using a combination of exchange-traded funds and special situation stocks. Birenberg appreciates your feedback; click here to send him an email.