News Corp.

Dear Mr. Berko: Back in late 2007, I bought 400 shares of News Corporation at $25.05, and it's been downhill since. I should have sold it when it broke $20, but my broker told me to hold the stock. Then I should have bought 400 more shares on my broker's advice in late 2009 when it got down to $6, but I panicked. Now it's trading at $17. Please tell me your opinion on News Corporation (it has two stock classes) and if you think that the economies of the U.S. and Europe will recover enough to move News Corporation back to my purchase price this year. N.W., Fort Walton Beach, Fla. Dear N.W.: I just realized that News Corporation (NWS-$17.01), run by the Aussie K. Rupert Murdoch and Kingdom Holding (Saudi Arabia), owns Fox News; as well as 20th Century Fox Studios, which produced "The Chronicles of Narnia: The Voyage of the Dawn Treader," "Avatar," "Big Momma," "X-Men" and "Ice Age." NWS also owns the popular pay-TV company SKY Italia, SKY Deutschland and SKY UK, as well as MySpace, hit programs like "24" and "American Idol," publisher HarperCollins, plus a humongous film library that includes "Star Wars," "X-Files" and "The Simpsons." Murdoch and Kingdom also own The Wall Street Journal, Barron's, The New York Post and a few smaller U.S. papers. But he and his Saudi friends don't stop there. NWS also owns the London Times, the Sunday Times and The Sun in the U.K., 147 newspapers in Australia, plus a plethora of digital media properties and outdoor advertising properties in Russia and Eastern Europe, plus 27 TV broadcast stations in the U.S. And Murdoch's cable network programming, via its direct broadcast satellite, distributes programming in Latin America, Asia and Europe. That's just a peripheral overview of the $34 billion revenue, worldwide entertainment and news company with 54,000 employees. NWS has more moving parts than a trainload of Swiss watches. NWS has a solid financial foundation, earnings are expected to grow from 95 cents to $1.05 this year, and the dividend should come in at l6 cents. NWS has a comfortable book value of $10.10, decent net profit margin of 7.8 percent, plus a growing and healthy cash flow of $1.40 per share and only 2.6 billion shares outstanding. Standard & Poor's, Ned David, Credit Suisse and a few other "biggies" have a "buy" rating on NWS with a 12-month target price between $18 and $23. But this price requires that NWS trades at a price-to-earnings ratio of 20 that I believe is too high. And while I will question Standard & Poor's "buy" advice (they never offer "sell" advice), I admit a grudging admiration for the folks at Ned David and Credit Suisse. However, that admiration isn't enough to encourage my agreement with their strong buy ratings on NWS. And while NWS may be a "go-to" stock for some investors looking to increase their foreign exposure, the shares just don't light my corncob. I don't care for its two classes of stock (voting and non-voting), I think MySpace has lost its cache, while its cable properties are losing subscribers and advertising to the Internet. And as the economies of Europe stagnate, I think NWS's advertising revenues will be hurt, and there may be a long arid spell before another "Avatar" or "Ice Age" reaches an audience. NWS is a conundrum of moving parts that I can't get my hands around, and even its moving parts have moving parts that run helter-skelter in different directions at the same time, sort of like particles in a quantum physics equation. I rate NWS as neutral, and I don't think it has a Mad Hatter's chance in Wonderland of returning to the $25.05 price you paid in 2007. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2011 Creators Syndicate Inc. Published: Mon, Feb 21, 2011