Now that's News!
If you’re a frequent reader to our blog, then you’re probably already aware that we took a position in News Corp. last January (see There’s No News Like News Corp.). With all the phone-hacking scandal news surrounding News Corp., we felt we should briefly address our viewpoint over the matter.
While this is not something Rupert Murdoch would want in his media empire’s history, we believe it will prove to be simply a bump in the road, nonetheless. I suppose there’s always the “cockroach theory” that if this has been going on under executives noses (or, perish the thought, encouraged…), who knows what other fraudulent activities are going on in the company. True, you can never rule that out as a possibility, but we’re no more concerned about that possibility with News Corp. than we are with other company’s we own. Underneath it all, there are solid operating businesses. This is simply something plaguing the news channels because controversy makes for great news. If anybody knows and understands that, it’s News Corp. themselves. The Wall Street Journal, whose parent company is News Corp., has been writing about this on a daily basis! Ironically, by so doing, we believe they’ve been creating a buying opportunity in their own stock.
For one, this has clearly put an end to the BSkyB buyout talks, which means that News Corp. will no longer be overpaying to take ownership of the remaining portion it doesn’t already own. Instead, they now have an opportunity to buy back their own stock at low prices – a double win. Additionally, according to people familiar with the matter, Mr. Murdoch had been considering stepping down from the company before this whole scandal surfaced. Now, chances are pretty good that this may be the proverbial “nail in the coffin,” which could remove the “Murdoch” discount that the market seems to have been applying to the stock for all these years now.
Most importantly, even though the stock has appreciated somewhat from our purchase in January, it’s underlying businesses have continued to grow even more so. Thus, it appears even cheaper than when we originally established the position, giving us an opportunity to scoop up more shares of a solid company at a discount. Now that’s news!
Disclaimer: The specific securities identified and discussed should not be considered a recommendation to purchase or sell any particular security. Rather, this commentary is presented solely for the purpose of illustrating YCG’s investment approach. These commentaries contain our views and opinions at the time such commentaries were written and are subject to change thereafter. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. These commentaries may include “forward looking statements” which may or may not be accurate in the long-term. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable. Past performance is no guarantee of future results.