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April 09, 2009

Trimming Discovery Communications

Discovery Communications (DISCA) has been one Northlake's best performing stocks. The stock was purchased in mid-September prior to the market crash at $16.50. Today, I trimmed the position across most client accounts at $17.83. Pretty amazing that any stock, let alone a media stock, is above its pre-crash level. With most all other holdings down sharply since the DISCA purchase, the position size had swelled to north of 4% in many accounts. Obviously, I still like DISCA as I did not sell the entire position. However, I still see the market and advertising environment as fragile so I want to avoid concentrated positions. DISCA has less margin for error due to its well-earned premium multiple of earnings and cash flow. 1Q earnings are due later this month and I do not think there will be a disappointment. The last two quarters were positive surprises. The key metric will be domestic advertising advertising growth. Expectations are for flat growth (that is excellent compared to -5% to -10% for most media companies). Here's hoping that my sale proves wrong so Northlake clients make more money on their remaining DISCA positions.

Posted by Steve Birenberg at April 9, 2009 09:26 AM in DISCA