Today's guest blogger:
SCBA's Thom Callahan:
You need not have an advanced degree in investing or have Wall Street
insider information to see a trend that is so obvious, if we would only
spend 10 minutes to really look at it.
2013 was a great year for Radio stocks with most publicly traded
Radio companies doubling and/or tripling their 12 month performance.
These stunning Radio stock increases can only be attributed to 3 key
factors; a greatly improving ad revenue environment, a higher dividend
to shareholders, and the realization from trading houses and investors
that the ad supported, local Radio model works very well after all.
Why did it take these “experts” so many years to come to the same
conclusion all of us in Radio knew all the time? Perhaps we need to
understand that it takes most businesses a very long time to become
established, profitable, and worthy of the public’s trust,
like Radio has.
If the past is prologue, as suggested by William Shakespeare, then
perhaps we need to be more cautious on what the financial/media experts
are calling the “next big thing”. It is very difficult for any new
medium to compete against Radio in the long term which makes investing
in companies looking to compete with Radio a
very risky proposition.
Here are just three glaring examples of why betting against Radio is a very bad investment decision.
Let’s go back a few years, specifically to Feb 2, 2000. On that date,
the experts were predicting that Sirius/XM would “crush Radio” and just
like sheep, investors rushed to buy the stock, which on that date,
traded at an inexplicable $59.90 a share. As we begin 2014, the
Sirius/XM market share for listeners is barely 11% nationwide and their
stock opened this week at $3.49.
That is a brutal 94% loss in stock value since its inception.
Also, if Liberty Media buys up the rest of the company as reported this
week (it owns 50% of the shares now) it is widely known that
stockholders will take another unfortunate hit as Liberty Media is a
cable company with no long term interest in the Satellite music business
other than acquiring its cash flow at bargain basement prices. Think
under $3.00 at least.
Strike one for the “experts”.
Now let’s look at another “internet darling” from the more recent
past. While Groupon was never a direct threat to Radio, it was treated
like the next “big thing” from the “experts”. Based on all of its
outstanding press and the “experts” strong buying signals, Groupon was
supposed to revolutionize the coupon business and redefine the shopper’s
experience for bargains. In fact, some suggested that Groupon posed a
threat to Radio as the ROI would be more attractive than Radio
commercials.
Really?
Well, Groupon Stock traded at a robust $20.63 per share in 2011, and
by the end of 2012; the stock plummeted to $4.86 a share, but to its
credit, has rebounded somewhat in 2013 and closed the year at $11.77.
This is due primarily to “an evolving business model” that has nothing
to do with its original premise.
This still represents a nasty stock decline of 43% for Groupon since its inception.
Strike two for the “experts”.
Feeling a bit apprehensive about “expert predictions”? Well, you should be.
Pandora’s widely overvalued stock price and its “darling status”
among the “experts” and the media still can’t get this company to grow.
In February 2013, its webcast metrics as reported by Triton Digital
recorded 1,918,000 visitors as being logged in to its URL with the
average time spent listening recorded at 36.6 minutes.
From February 1, 2013 through October 1, 2013, visitor levels are
slightly down to 1,891,982 with a more ominous indicator of the time
spent listening loss down to 35.4 minutes. That’s a .3% loss in average
time spent listening yet no one is reporting that. Can you imagine the
reaction from the “experts” if Radio lost .3% of its national
listenership in less than 9 months?
Once again, we must look to Pandora’s stock prices as the past is
indeed prologue, at least as far as stock value is concerned. The
Pandora investor has had a bumpy road to say the least. Pandora stock
debuted in June 2011 at $18.91 and remained at that mediocre level for
the next 2 years and 3 months. Finally, the stock started to move up on
September 3, 2013 to $25.13, and began to show some financial life. It
then went back and forth for the next 3 months and opened this week at
$33.40. It has taken Pandora two and half years for its stock to rise by
only $14.49 a share and only by $6.96 since October 3, 2013. How come?
Well…maybe everyone is starting to understand that this unprofitable
business model cannot sustain itself over the long term, no matter how
many Radio sales people they hire to prop up short term revenue gains.
Remember Google’s attempt to hire Radio sales people for their misguided
attempt in Radio “remnant” inventory?
If this is the next “digital darling” to watch, why has it taken 27
months for its stock to make any appreciable climb? And why has Pandora
lost .3% of its average time spent listening in less than 9 months?
Could it be that just playing music, with no local or human connection, is just not enough for the average listener?
Strike three for the “experts”.
If you are looking for a safe investment with decades of sustainable
growth and value, I suggest you avoid all the “experts” and return to
making money on your investments.
The stock we are recommending for the short and long term is called Radio and it has withstood and ultimately conquered every supposed audio replacement for the past 70 years.
If the past is prologue, history readily proves that Radio will be a great investment for many decades to come.
How many shares would you like?
