This article is part of our Rising Star Portfolios series.
Late last month I purchased shares of Ascent Media
As I detail in my previous article, I like transactional events that can create value for shareholders. Ascent recently acquired Monitronics, a privately held security system company, after disposing of all its legacy media assets following its spinoff from Discovery Communications
The Monitronics business has many attractive traits: recession resistance, low investments in fixed capital, and scalability. The company uses a network of 400+ independent dealers to find customers and install security systems, and then buys the service contract from the dealers at a predetermined price. Then the company monitors the systems from its Dallas service center. The industry as a whole has grown every year over the last 15, compounding at a 6.2% rate. Monitronics has grown even quicker, as I explain in my original article. Customer quality as measured by credit scores has continually improved, too.
The business produces recurring monthly revenue, for solid and reliable cash flow. And I also like the fact that billionaire John Malone, known for his capital allocation in media companies such as Liberty Capital
Ascent announces earnings next week, so I'm anxious to see what the company reports with one full quarter of Monitronics' business on its income statement. Tomorrow I'll take another 3% stake in Ascent or $500 of my total capital, doubling my current stake.