Buying (Actually, Adding To) Liberty Media

I've owned Liberty Media Corporation Series A (L/NYSE) stock since way before launching this site. I bought more today. It closed in New York on Thursday at $8.52 per share.

I don't think anyone really questions that Liberty Media is undervalued. Yet shares have been languishing because investors aren't confident the underlying value will be realized.

Like virtually everything I buy, Liberty Media has problems. My hunch is that they are short term problems and will ultimately be overcome. Yet problems nonetheless. I bought more stock because I think the company is in the process of overcoming these obstacles.

What are they?

• Liberty Media is in the process of transforming itself from a holding company to an operating company. This is a positive, but Wall Street won't hop on board until this train has left the station. I'm early but I've got my seat. (On a side note, it was just a couple of years ago that investors thought of the company as a closed-end fund of media holdings run by John Malone.)

• Chairman John Malone was worshiped by Wall Street as a "cable guru" during the TCI days. But he bought a lot of tech-related stocks near the height of the bubble, and his acumen has never ranked as high since. I believe he's top-notch.

• While the spin-off of Liberty Global (LBTYA/NASDAQ) was applauded by Wall Street, the recent spin-off of Discovery Holding Company (DISCA/NASDAQ) has not been. The reason? Analysts saw the first as helping unlock the value of Liberty Media, but not the second. I think they're both good moves.

• And, perhaps most of all, the biggest impediment to unlocking value at Liberty Media is its passive public equity holdings of News Corp. and Interactive Corp. There has been much speculation that Malone will swap his voting shares in Rupert Murdoch's company in exchange for operating assets. I think many on Wall Street are frustrated that nothing has happened on this front.

What's more, Robert Bennett has just resigned as CEO of Liberty Media. He's leaving in April 2006 I understand, with Malone taking over the dual role of Chairman and CEO. I don't think this development will ultimately be a factor one way or another in the long term performance of the holding.

Comments

[John]

Nino,

Liberty Media's at a 5-year low? Sounds like a great time to buy, but that's just me and I could always be wrong. Sounds like you think I am. Fair enough.

Everything you said about Discovery Holding Company is true and has been discussed on this site. But I wish, for the time being, more investors held your view. Maybe then the share price would sink to the $11.25 level I've been hoping for. (That would have been the same price drop Liberty Global saw after its spin off form Liberty Media.)

I've said on here several times Liberty could turn out to be dead money. You may be right that this is a lousy pick.

Thanks for reading.

[John]

Nino,

I actually agree with much of what you say. Except I am not planning on selling L and if it sinks lower (and its NAV remains intact) I will probably being buying more.

I too don't care of the new class of shares in Liberty Global, at least as of now. I'm still watching Discovery and may add to my holdings.

I actually am intrigued by some other media companies.

Thanks for your comments.

[nino]

See my comments on Univision in Sept. Boy, was I right.

[John]

Congratulations, Nino!

[John Sweda]

On May 9, 2006, shares of Liberty Media Corporation (L/NYSE) were exchanged for shares of the Liberty Interactive (LINTA/NASDAQ)and Liberty Capital (LCAPA/NASDAQ) tracking stocks, and the old Liberty Media Corporation Series A and Series B shares, which traded under the L and LMC.B ticker symbols, ceased trading. Investors can no longer purchase L or LMC.B shares. Among some of the businesses interests are QVC, Encore, Starz, IAC/InterActiveCorp, and News Corporation. There is an agreement to transfer Liberty's shares of News Corporation for News Corporation's shares of DirecTV, a 38.5% position. The swap is expected to be completed in mid-2007. I also understand that Liberty Interactive recently (2/22/07) acquired the Atlanta Braves baseball team from Time Warner.