Old School Value

I wrote this on a comment before so I'll just copy and paste it here for now. If you more questions just let me know.

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If you go through their annual reports you’ll find a lot of information regarding the business.

I won’t be going into too much detail on these picks as these are my pocket aces. I’m trying to keep it quiet while I wait to get a full position so I’ll only leave information in the comments.

On the macro side, radio stocks are very easy to understand. Their business model simply focuses on ad revenue. Play ads, get paid. Easy as that.

What a lot of people don’t see or accept is that terrestrial radio will not go away. I personally will never pay for satellite radio and neither will most of my friends.

So say you listen to the radio in your car. You’ve got 6 or up to 8 channels in a car and you’re going to set it on a preset. How often do you change those presets? Once you find a good radio station, I’m sure you never change right?

You listen to the morning drive and most probably the same station again during the commute home.

So content is what makes radio "sticky" and I can live with the ads, which is where the revenue comes in.

From a macro view, ad revenues drop significantly with the economy. It’s cyclical, yet predictable, and right now we are in a down cycle.

Notice how during the Cash for Clunkers week, car ads started to come back on the radio after a long hiatus? That’s what’s going to happen when the economy lifts up and businesses start to spend again.

I’m sure you get the idea about why I like radio at the moment.

As for fundamentals, look at their free cash flows, whether their writedowns will affect cash, whether cash can pay off debt and you’ll see that the problem with radio stocks isn’t a solvency issue. They had a liquidity issue as the debt they needed to roll over came due during one of the worst years to receive financing.