Jeers to the major television networks for having zero coverage of the Democratic National Convention last night and planning to air only three hours of coverage in total this week. Network execs say there's little news at the conventions and ratings are deplorably low. But was it really critical to the nation to broadcast another episode of Big Brother last night?
All indications are that this will be a very close presidential election, with an electorate sharply divided. Americans should have ample opportunity to learn about both parties' platforms and candidates, and despite the information superhighway, we're still getting a ton of our information from the tube. At a time when we're fearing terrorists might do something to impinge the democratic process, ABC, NBC, and CBS should have sucked it up and done something useful for the country.
In today's Motley Fool Take:
- It's Time for Time Warner
- Shameless Plug: Save $5 on Your Credit Report
- Some Kind of Monster
- Discussion Board of the Day: China Connection
- Should You Prepare For Pain?
- Quote of Note
- More on Fool.com Today
It's Time for Time Warner
Time Warner, a Motley Fool Stock Advisor pick, reported second-quarter earnings down 27% at $777 million, or $0.17 per share, with a tough comparison with 2003 because of a legal settlement with Microsoft
Revenues were up across the board in all its business segments as the economy improves and consumers respond favorably to its offerings. Although it will face some tough comparisons, especially concerning movie releases from last year, the company said it expects a strong second half of 2004.
For those who wait anxiously to see how the America Online unit is doing, its fortunes improved with a 23% increase in advertising revenues, reflecting industrywide gains in Internet advertising. However, subscription revenue was flat, with U.S. subs continuing their declines; 668,000 users defected in the quarter, paring AOL's subscribership to 23.4 million. (AOL's initiatives -- such as harnessing the free Internet -- as it tries to stop subscriber defections to broadband have been interesting to watch.)
However, as longtime Fool Rick Munarriz commented earlier this week, while AOL gets serious attention, there's a lot more to it than just the beleaguered ISP. In filmed entertainment, for example, the company benefited not only from the release of the newest Harry Potter series but also from DVD releases of some other big-name flicks, such as Matrix Revolutions and The Lord of the Rings: Return of the King.
The company's also the name behind HBO, TNT, and TBS, to name a few; despite my own previous doubts, in its conference call (transcript courtesy of Thompson StreetEvents), Time Warner management said HBO's Sex and the City is already a hit in its sanitized form on TBS. Magazines in Time Warner's publishing segment include Time, Fortune, and Sports Illustrated, and it published 16 books that landed on the New York Times Bestseller list. When it comes to media, Time Warner does own some of the best-known names in the business.
Indeed, maybe the company does take too much flack for the widely scrutinized union with AOL. Maybe Time Warner is beaten down and undervalued, as was the contention in a Foolish piece this week. Despite AOL's travails, with a trailing P/E of 23, it may not be a high price to pay for a company that participates in both traditional media and pop-culture hits as well as areas that indicate future growth, such as cable Internet and VoIP.
Alyce Lomax does not own shares of any of the companies mentioned, but having enjoyed Prisoner of Azkaban, she's looking forward to the next Harry Potter movie, which executives said is scheduled for release in 2005.
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Some Kind of Monster
It's nice work if you can get it. Monster Worldwide
Things have been going well for Monster lately. The shares received a gutsy upgrade from Morgan Stanley
That's significant because that parallels the rival-thumping traits of Motley Fool Stock Advisor recommendation eBay
Monster is looking for the good times to continue as it sees sequential top-line improvement while earnings for the September quarter should come in at $0.16 a share. That would signal a 45% gain over last year's $0.11 showing.
After spinning off its executive search and eResourcing business as Hudson Highland Group
Monster? You're hired!
Longtime Fool contributor Rick Munarriz thinks that any honorable work is good work. He does not own shares in any of the companies mentioned in this story.
Discussion Board of the Day: China Connection
Are you considering buying into the Chinese market? Are the political risks enough to scare you away, or are you more concerned with socioeconomic issues? All this and more in the China Connection discussion board. Only on Fool.com.
Should You Prepare For Pain?
Jeremy Grantham, a highly successful long-term investor and principal for investment management firm Grantham, Mayo & Van Otterloo, noted in his quarterly letter to shareholders that he saw the potential for enormous amounts of pain in the U.S. stock markets, deeming the next two years "a black hole."
There are, of course, as many opinions about the stock market and its prospects as there are market participants. Certain people have built up long histories of credibility through their thoughtful dissection of events in the past. Grantham certainly fits this bill. In a stock market that is highly dominated by the viewpoint that we have entered into a new bull market, Grantham's words of warning deserve some attention.
We at the Fool aren't huge market commentators. We've done it, of course, and we recognize fully that the emotional tendency of the beast creates a high level of correlation between the returns of individual equities and the market as a whole. But whereas I may simply be invested in a list of a very few companies that I consider to be good values at current prices, the fact remains that the polity of this readership makes up a pretty good proxy for the American equity market. And according to Jeremy Grantham, in order for the valuation of U.S. stocks to return to their trends in earnings and in price-to-earnings ratios, large caps must lose about 38% of their value, and small caps 41%.
His rationale is simple: Both profit margins and P/Es are above trend at present. As profit margins are higher than they have been at almost any point in history, there isn't much room for them to grow. The other answer that would generate positive returns would be an increase in P/Es. But from a long-term wealth generation perspective, this would be "a disaster." The trend line suggests that fair value for the Standard & Poor's 500 index sits at about 700. One of Grantham's defensive moves is to seek out equities that have low to negative correlation with the stock market. One of these is timber, with companies such as Plum Creek Timber
Grantham also notes that we're entering an era of uncharted risks due to the rapid ascent of hedge funds, which tend to: a) use substantial leverage, and b) be averse to volatility. Should volatility in certain asset classes rise, the $2 trillion hedge fund industry may have to retrench in ways that could disjoint the market. Grantham's point was not that this will happen, but that it might. His message for the overall risk in the U.S. stock market, though, was definite.
Quote of Note
"The secret of success is to know something nobody else knows." -- Aristotle Onassis
More on Fool.com Today
In Index Funds: Your Best Bet, Bill Mann argues that the best place for many investors' money is a good, unmanaged index.... After evaluating the energy market, Rich Smith wonders: Are Coal Stocks Really Diamonds?... In Why This Value Guru Sleeps Well, Matt Logan says that Bill Nygren's not worried about the market's valuation, so why are you?
In other news:
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