Viacom, Inc. (VIAB), Time Warner Inc. (TWX) & DirecTV (DTV): Media Companies Are Swallowing Shares


DIRECTV (NASDAQ:DTV) offers subscription TV via satellite, an arrangement which allows the company to compete against local cable and telecommunications operators as the business requires less capital per subscriber. It also allows for worldwide penetration; the company has nearly doubled its business in Brazil in just three years.

Analysts believe that the company could grow its Latin America business exponentially ahead of the World Cup, which kicks off in June 2014.

DIRECTV (NASDAQ:DTV) does not create its own content, but rather it leads in pay-TV products like NFL add-on packages. DirecTV customers spend more on cable than customers of any other provider. Spendy customers give DIRECTV (NASDAQ:DTV) an edge when it comes to exclusive content negotiations.

DIRECTV (NASDAQ:DTV) doesn’t just pay up for content, it’s a believer in paying up for its own shares. Since 2007, share count fell from 1.2 billion shares to 644 million in 2013, a near-halving of share count in just 6 years. A combination of organic growth and a lower share count sent EPS from $1.21 in 2007 to $4.58 in 2012 on a fully-diluted basis.

Upon releasing fourth quarter 2012 earnings in February, the company announced another repurchase authorization of $4 billion.

Traditional media vs. online media

Old school media stocks are bargains as they regularly return cash to shareholders. When one compares “old media” to rising media companies like Netflix, Inc. (NASDAQ:NFLX), valuations are absolutely in favor of the old guard.

Ride aggressive buybacks to higher stock prices. These three stocks could be winners as they retire a significant portion of their outstanding share count.

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