Buying (Actually, Adding To) Liberty Media

I've owned Liberty Media Corporation Series A (L/NYSE) stock since way before launching this site. I bought more today. It closed in New York on Thursday at $8.52 per share.

I don't think anyone really questions that Liberty Media is undervalued. Yet shares have been languishing because investors aren't confident the underlying value will be realized.

Like virtually everything I buy, Liberty Media has problems. My hunch is that they are short term problems and will ultimately be overcome. Yet problems nonetheless. I bought more stock because I think the company is in the process of overcoming these obstacles.

What are they?

• Liberty Media is in the process of transforming itself from a holding company to an operating company. This is a positive, but Wall Street won't hop on board until this train has left the station. I'm early but I've got my seat. (On a side note, it was just a couple of years ago that investors thought of the company as a closed-end fund of media holdings run by John Malone.)

• Chairman John Malone was worshiped by Wall Street as a "cable guru" during the TCI days. But he bought a lot of tech-related stocks near the height of the bubble, and his acumen has never ranked as high since. I believe he's top-notch.

• While the spin-off of Liberty Global (LBTYA/NASDAQ) was applauded by Wall Street, the recent spin-off of Discovery Holding Company (DISCA/NASDAQ) has not been. The reason? Analysts saw the first as helping unlock the value of Liberty Media, but not the second. I think they're both good moves.

• And, perhaps most of all, the biggest impediment to unlocking value at Liberty Media is its passive public equity holdings of News Corp. and Interactive Corp. There has been much speculation that Malone will swap his voting shares in Rupert Murdoch's company in exchange for operating assets. I think many on Wall Street are frustrated that nothing has happened on this front.

What's more, Robert Bennett has just resigned as CEO of Liberty Media. He's leaving in April 2006 I understand, with Malone taking over the dual role of Chairman and CEO. I don't think this development will ultimately be a factor one way or another in the long term performance of the holding.

Comments

[Nino Marcozzi]

Your arguments to hold L are nothing we haven't read or already know. The undervalued term has been so overstated that it is virtually meaningless. The stock, adding back LBTYA and DISC is at 5 year lows. Malone has been quoted as saying if a CEO doesn't double his company's stock in 5 years, he should be terminated. Of course, I'm not advocating doing just that, after all, he does have voting control, but clearly the restructuring from holding to operating is not going fast enough. DISC will be dead money unless guidance is better or COX/Newhouse contribute their holdings. We know that can't happen for at least 1 year because of tax issues. As for NWS, frankly, Murdoch has moved on. He's got a poison pill for another 2 years and Malone knows he's got a hell of gunfight on his hands with that crowd. Why not immediately spin off QVC and IAC/Expedia. Why not declare a dividend to give the stock a boost then? Nobody wants STARZ? Who knows? We haven't heard a thing from L in a while and I'm sure they are working diligently to max. shareholder value but its going too slowly....Large cap is not where you want to be anyway. With 2.9 Bill out, what can they possibly hope to achieve....You know, Malone wants Murdoch to leverage up to buy back stock. We know Malone can't do that....because L's bondholder's will scream/dump bonds badly and the agencies will surely downgrade again....I mean its bonds are already junk! As for Bennett, who cares. Malone needs to dramatically up the ante and fast. The stock stinks. SELL.

[John]

Nino,

Liberty Media's at a 5-year low? Sounds like a great time to buy, but that's just me and I could always be wrong. Sounds like you think I am. Fair enough.

Everything you said about Discovery Holding Company is true and has been discussed on this site. But I wish, for the time being, more investors held your view. Maybe then the share price would sink to the $11.25 level I've been hoping for. (That would have been the same price drop Liberty Global saw after its spin off form Liberty Media.)

I've said on here several times Liberty could turn out to be dead money. You may be right that this is a lousy pick.

Thanks for reading.

[Nino Marcozzi]

Wait there's a difference between DISCA and LMI - now LG. There was a major transaction - consolidation if you will - between UCOMA and LMI. This was a huge positive. LBTYA is a proxy for Europe and their markets have been on fire absolutely scalding hot. Big relationship there. Japan too is on fire and recently global managers recommended upping the weighting. Of course the cable mkt in JAP is ripe for consolidation and with JCOM recently listed and with its own currency, they will clean up. Malone has kinetic abilities when it comes to timing. He is a fantastic market timer. What they did with LMI they need to do with L's other assets. DISC next earnings call will be very interesting. Don't forget Ascent Media is worth up to, I think, $1.00-$1.25 a share there...So do the math on DISC. Malone has been a huge buyer of its stock under $15.00. Insider buying is a leading indicator and I'm sticking with him. I'm a little confused about issued a class C on Liberty Global there. Lots of arbs in that one now and the C class trades at a discount to the reg. Why they structured it like that...is convoluted and that's what drives me with Malone's gang....Instead of making things simple, they tend to complicate matters - that's a negative. But there must be some reason for it, but this decade old observer of Malone hasn't figured it out. This is not a large cap market or a media market....This is a mid-cap market with strong emphasis on Resources. Underweight media plays. The turnaround story here is TWX. If TWX were to restructure beyond the market's expectations and price TWX closer to its NAV, then the transaction could be a catalyst for turning media around.....but look at NWS corp. The most integrated, vertical, undervalued play in the world and look at it...It continues to lag even the S&P and that's very hard to do....S&P is up 1% YTD. Can you imagine is the US were not growing at 4%!!! The fact is that we're going from a push to pull area and the internet is the area of growth while traditional media is not. SELL L, buy Teck Cominco.

[Nino Marcozzi]

L is going to break 8$ very soon. Could there have ever been a better reason than to either short or sell calls/buy puts on a security?...Without any further comment from the L camp and a dismally received reception from L's attendance at the Merrill Media conference, the stock is going to sink past through the 8 threshold. We haven't seen it there in years and L needs to immediately address concerns the marketplace has with respect to its ongoing -or is it never ending-discussions about creating value for its shareholders. I haven't seen anything of value being created here. The stock and management continue to struggle. Pay a dividend, spin out QVC...What an outrage. Sell.

[John]

Nino,

I actually agree with much of what you say. Except I am not planning on selling L and if it sinks lower (and its NAV remains intact) I will probably being buying more.

I too don't care of the new class of shares in Liberty Global, at least as of now. I'm still watching Discovery and may add to my holdings.

I actually am intrigued by some other media companies.

Thanks for your comments.

[Nino Marcozzi]

You want a potential blockbuster. You've got to keep your eye on Univision. Here is a company run by a contemporary's of Malone's in Beverly Hills called Perenchio. Now talk about legendary. Italian guy running Spanish language television. Most of its content comes from Mexico's Televisa, and recently, the allegations in court documents by Univision suggest the depth of the enmity is even deeper
than imagined. Televisa, which owns 11% of the co. believes the way to convince Univision to give it a more active role in running the company is to demonstrate just how vital its cooperation and support is to its success. UVN on NYSE. Spec. buy

[Nino Marcozzi]

Liberty Media (L)would do well by
cooling its acquisition spirations for now and spending cash on its own shares. Under certain assumptions, this could increase its intrinsic value to as much as $15-16 per share through share repurchases financed through asset
disposals an increased debt, the broker says. Probably not a near-term possibility, however, Liberty is unlikely to consider this approach until it concludes it has exhausted its search for acquisitions. SELL.

[nino]

See my comments on Univision in Sept. Boy, was I right.

[John]

Congratulations, Nino!

[John Sweda]

On May 9, 2006, shares of Liberty Media Corporation (L/NYSE) were exchanged for shares of the Liberty Interactive (LINTA/NASDAQ)and Liberty Capital (LCAPA/NASDAQ) tracking stocks, and the old Liberty Media Corporation Series A and Series B shares, which traded under the L and LMC.B ticker symbols, ceased trading. Investors can no longer purchase L or LMC.B shares. Among some of the businesses interests are QVC, Encore, Starz, IAC/InterActiveCorp, and News Corporation. There is an agreement to transfer Liberty's shares of News Corporation for News Corporation's shares of DirecTV, a 38.5% position. The swap is expected to be completed in mid-2007. I also understand that Liberty Interactive recently (2/22/07) acquired the Atlanta Braves baseball team from Time Warner.