Time Warner Inc. (NYSE: TWX) On this one James Cramer and I agree 100%, but I was there first! We are in at $12.10. I also agree with Cramer that TWX could easily be $28 to $30 per share in a year. The company has cleared out a lot of old baggage, reduced debt, bought back shares, completed the acquisition of Adelphia, now Time Warner Cable and cleaned up the Comcast relationship. Management has made bold moves with AOL, radically changing the business plan, now offering free service and continue to focus each business segment. Even BloggingStocks.com has grown tremendously since TWX bought Weblogs, Inc. in October 2005.
There are some notes of caution because few stories are perfect. When I first noted the value in TWX months ago its P/S was 1.24 -- the lowest of our BloggingStocks -- and I said, very worthy of consideration. Now it is 2.34, so this is not what is driving my interest. The P/E of 19.87 is no bargain, either, and the ROE, ROA and ROIC are way to low for me to even discuss. What I think is compelling about the story is that TWX is just now beginning to come out of its shell. Parson's honeymoon period is long over, new large shareholder Icahn is looking over everyone's shoulder, the cable business is ready to rock big time, and AOL finally has clear direction and a rudder. And BloggingStocks ... well, who knows -- great editors, great team, great potential!
TWX does pay a dividend yield of 1% but it should be higher. If it does not increase ROIC than the company should give the money back to us, the shareholders. I expect that we will see the metrics improve significantly over the next few quarters as it reports growing earnings. (Read the Company Profile.)
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