|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
Contrarian Ideas You May Want to Take a Look At
Posted by: Federico Zaldua (IP Logged)
Date: September 23, 2013 10:20PM
Here I take a look at two stocks that analysts from different investment firms have been downgrading since the year started. I believe there exists a long case for both of these companies. Their future could be brighter than what the market seems to be expecting and, hence, deserve a second look. Investors such as John Burbank and Michael Price are already long!
Betting on Renewed Growth
According to Credit Suisse, consensus earnings downgrades for China Unicom (CHU) have been turning into upgrades over the past two months. The reason is simple: Top-line growth seems to be much healthier than many had expected. For the second quarter, the company has delivered 20.5% year-over-year cell phone revenue growth and more than 3% revenue growth in its fixed-line business. Besides, lower churn figures should help EBITDA margins going forward.
On top of what has been stated above, valuation also seems extremely compelling. As I always quote, “Price is what you pay; value is what you get.” Trading at 3.6 times 2014 EV/EBITDA and a 13.3 times P/E while the company is expected to pay a 3% cash dividend yield as for next year, I think that, at the current price level, you are getting more than what you are paying for. The stock is being held by GMO, Jeremy Grantham's firm.
Sum of the Parts Valuation
Murdoch's News Corporation (NWSA), which is held by investors such as Michael Price and John Burbank, looks cheap when you perform a sum of the parts valuation estimate. As a matter of fact, the company trades at 80% its book value when it owns a $2.5 billion net cash position and when it is poised to generate an always growing 7% free cash flow yield in 2014.
On one hand, the company's News & Info division is among the best positioned publishing businesses in the world. Dow Jones and Wall Street Journal are both strong international brands that are growing in audience and sales. On the other hand, the company owns other businesses that are performing extremely well such as NAM (America's dominant provider of inserts and in-store marketing) or its multiple assets in pay TV, which are generating increasing amounts of cash. Overall, I believe News Corporation offers good value at 2014 7 times EV/EBITDA. The company should re-start paying a dividend as soon as next year (I would expect a 2.7% cash dividend yield for 2014) and has the necessary firepower to acquire further valuable media assets.
Both companies named above have resisted heavy headwinds during a good part of 2012 and 2013. I think they should now re-start delivering good results, coupling those results with high top-line growth. While China Unicom is a growth play at an extremely compelling price, News Corporation is a value play. I believe the market is not assigning a fair price to the various media assets the Australian conglomerate fully owns. I would keep both companies into my equity watch list. It's always great to find value where other investors don’t.
Guru Discussed: John Burbank: Current Portfolio, Stock Picks
Michael Price: Current Portfolio, Stock Picks
Stocks Discussed: CHU, NWSA,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.