Screamers are bad ... at first
Back in my old rock climbing days, a "screamer" was a bummer. A really bad experience, like a 20-foot fall. Something so scary you never want to experience it again. But in the stock market, a screamer can become a great opportunity. Just ask those who got a double or triple out of Tyco International (NYSE:TYC) following its well-known management troubles, or anyone who picked up shares of MCI after it emerged from the shambles that was WorldCom. (Those who did, on the recommendation of our Motley Fool Inside Value service, saw a 47% return in just a few months.)

In many ways, the last couple of years have been a nonstop screamer for stockholders in Hollinger International (NYSE:HLR). This was a company that was savaged by sweetheart deals and other less-than-savory behavior under the leadership of former ringmaster, the ex-pat, store-bought Lord Conrad Black. Could we be seeing a value play now that Black is out and new management is cleaning house? I think it's possible.

Worst of a sorry lot
Any of you following the integrated media business that used to be known as the newspaper business realizes that Hollinger's management scandal could not have come at a crummier time. Even well-run, respected outfits such as the New York Times (NYSE:NYT), Washington Post (NYSE:WPO), and Tribune Company (NYSE:TRB) have seen their ad divisions wither on the vine as online advertising revenue has risen nicely, even skyrocketed, for Internet eyeball providers such as Yahoo! (NASDAQ:YHOO) and Google (NASDAQ:GOOG).

Today Hollinger, which continues to purge its books of past shenanigans, posted an update for fiscal year 2004. Take the word "profit" with a healthy shake of salt, as the black ink on the bottom line is entirely the result of divestitures of large portions of the business. That brought earnings per share to $2.59 a stub, after a $1.81 loss per share from continuing operations.

Sunshine on the horizon?
Those of you who know I like to get my snark on might be surprised at what I'm going to say next. I'm starting to get interested in this business. As one of the crazy stepchildren of our Inside Value team, I'm always intrigued by a company that everyone hates, even if it richly deserved it. I'm only just beginning to dig into Hollinger again, and there's not much detail to be had until full financial results come along later in the year, but here are few things to put into the value column for this one.

  • It's a beaten-down stock in a beaten-down industry. (Yes, Virginia, I think that's a plus.)

  • The balance sheet isn't terrible, with something like $680 million in cash and short-term investments, net of upcoming obligations like dividends payable.

  • With a few adjustments, you could make the argument that it's already cash-flow positive.

  • I'm familiar with Hollinger's Chicago-area holdings -- in fact, I used to work for one of them -- and although I didn't like how they were run, they did have significant readership and other competitive advantages in a growing, affluent area -- especially the suburban units. Properly managed, these properties could be steadily profitable, and they comprise nearly 85% of the company's revenues. In fact, the Chicago group did show an operating profit of $96 million for 2004, but this, and the Canadian group's operating profit, were chewed up by the $111 million in expenses generated by the managing arm known as the "Investment and Corporate Group."

  • Also consider that much of the current operating losses are owed to costs that shall pass, or at least moderate -- including unusually high prices for newsprint, legal fees, settlements, and services, as well as costs associated with restructuring.

Foolish bottom line
The bottom line is that there's so much crud and confusion here that most investors won't bother to take a second look for the positive I see above. And if that situation is creating one of Mr. Market's trademarks, short-term inefficiencies, it might give us an opportunity for oversized returns. Of course, none of this means that Hollinger is or will be a value, but I think it's worth any serious value investor's time to take a closer look. Even if you don't find a good investment, you can't help but be impressed with the continuing soap opera.

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Seth Jayson likes a well-run monopoly, like a newspaper, but only if it's properly prepared. At the time of publication, he had no position in any company mentioned here. View his Fool profile here.