Why I Am Long Time Warner: Investor

Time & Life
Oliver P. Quillia for cnbc.com
Time & Life

Over the last several days, I have been making my case for and against a handful of media stocks including, most recently, Pandora Media.

Today I’ll discuss what is likely the most undervalued stock in the bunch: Time Warner.

When I evaluate media stocks, I judge them with the following five criteria:

  • Massive and/or rapidly growing revenue
  • Multiple, diverse streams of revenue
  • Multiplatform delivery of premium content
  • Direct control over premium content
  • Ubiquity

Time Warner pretty much nails it on every count. As an investor who looks for companies that operate from a position of strength in the media space, I salivate over Time Warner.

Consider Time Warner’s massive reach and synergistic capabilities.

The company has three business segments: networks, filmed entertainment, and publishing.

Within those three areas, you’ll find myriad prime properties, many of which you probably wouldn’t associate with Time Warner. They range from HBO, TNT, TBS, and CNN, to People, Sports Illustrated, Fortune, and Time.

And, of course, don't forget about Warner Brothers, which has its hands in movie, television, and digital distribution, as well as interactive entertainment. I like to call Time Warner’s under-the-radar omnipresence “hidden ubiquity.”

It’s clear to see where the company scores high on my list of criteria, with one exception: multiplatform delivery. While it has dipped its toes in the area, Time Warner has not been quite as aggressive as Walt Disney, which includes its most valuable programming (e.g., ESPN) in several TV Everywhere initiatives.

Generally, I would see this relative lack of aggression as a problem. That’s not the case, however, with Time Warner.

The company’s HBO GO shows the world and its competitors that it “gets” the importance of multiplatform delivery. It is ready, willing, and able to operate in an era where the old guard must embrace new and social media. But, given the truckload of premium content Time Warner controls, there’s really no need for it to rush into anything. It can simply sit back, let the dust settle, and call the shots when it decides the time is right.

If Time Warner considered Netflix a legitimate threat, its executives would probably be offended that Reed Hastings thinks he can build an original programming powerhouse that resembles HBO overnight.

Remember, it took Time Warner decades to construct the Home Box Office empire. Time Warner CEO Jeff Bewkes has the luxury of sitting back and watching Netflix flip, flop, and flounder, while he keeps an eye on the moves his more credible peers make.

If “cord-cutting” is indeed for real, Bewkes can turn on a dime. But why would he jump the gun when he certainly has old guard interests (cable, satellite, DVDs, etc.) to protect? This is not a company fighting for survival. There’s no need to be rash.

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