• Cablevision Systems Corp. (CVC) announced Monday that it bought Long Island daily newspaper Newsday for $650 million, a deal Cablevision hopes will profit through cross marketing and advertising in cable and newspaper operations, Reuters reported. Cablevision – which also owns TV networks AMC and IFC, venues such as Radio City Music Hall and Madison Square Garden and sports teams New York Knicks and New York Rangers – recently announced it would buy the Sundance Channel for $496 million.

• Brazil’s government announced it will launch a sovereign wealth fund and offer more than $12.8 billion in tax cuts to boost the economy, Bloomberg reported. Called the Productive Development Policy Package, the plan hopes to increase exports and bolster infrastructure.  “We need to invest more and better,” Trade Minister Miguel Jorge said in a speech yesterday (Monday). “Investing better is nothing but taking a big leap in terms of the quality of our industrial matrix.”

• Oil prices hit a record high for the sixth straight trading day yesterday (Monday), before receding slightly. Light, sweet crude for June delivery jumped to a new record of $126.40 a barrel on the New York Mercantile Exchange, the Associated Press reported. Retail gas prices rose to a record $3.718 a gallon according to a survey of stations by AAA and the Oil Price Information Service.

• Consumer prices in China for the month of April were 8.5% higher than last year, the country’s National Bureau of Statistics reported. April inflation was driven by a 22.1% jump in food prices, the Associated Press reported.

• Despite a jump in revenue and subscribers, XM Satellite Radio Holdings Inc.(XMSR) reported a first-quarter net loss of $129.3 million, compared with loss of $122.4 million year ago. Revenue was $308.5 million, up 17% from a year ago. The company picked up 355,000 new customers through deals with auto manufacturers. It lost 51,000 retail customers. XM ended the quarter with 9.3 million subscribers.

• Shares of Research in Motion Ltd. (RIMM), maker of the popular BlackBerry device, climbed 7% yesterday (Monday) after the firm revealed its new 3G version. The stock gained $9.20 to close at $141.97. The BlackBerry Bold will be released later this summer, MarketWatch reported.

• Shares of Electronic Data Systems Corp. (EDS) soared 28% before having trading suspended late in the day yesterday (Monday). The tech stock gained $5.27 to close at $24.13 on news reports that Hewlett-Packard Co. (HPQ) could be announcing plans to buy the business solutions tech firm.

• An announcement that Clear Channel Communications Inc. (CCU) was trying to come to a settlement with banks that backed out on its planned $19.4 billion privation sent the stock up almost 10% yesterday (Monday). Shares gained $2.87 to close at $32.87.

A Contrarian Strategy: Why Clear Channel Is Today’s Top Stock Pick
by Floyd G. Brown, Advisory Panelist, Investment U

One of the most profitable investments I have made came after a magazine headline hailed the coming bankruptcy of Philip Morris. It took nerves of steel to buy the lowly MO in those days. It was after the largest legal settlement in U.S. history disgorged Morris and other tobacco stocks of profits to pay the healthcare bills of the 50 different United States. Attorney General Janet Reno attacked the company in the newspapers as merchants of death.

But in the eight years since I first bought Philip Morris, at around $19 a share, I have been paid a king’s ransom. The stock has yielded over 10% annually. I’ve seen MO’s dividends rise. The company has given me shares of Kraft (NYSE: KFT), worth more than my original purchase price. It gave me shares of Philip Morris International (NYSE: PM) this month. And for the icing on the cake, I still own all my original shares of Altria (NYSE: MO).

Why am I telling you this?

Because it says a lot about headlines in the mainstream media. They almost always get the story wrong. In this case, they were trumpeting the potential bankruptcy of Philip Morris just when the stock was cheap enough to be a long-term buy and part of my overall contrarian strategy.

Contrarian Strategies: How to Find Wall Street’s Best Deals

When markets are hot, contrarian strategies go the other way, toward the cool spots. Contrarian investors prefer to skulk around in broken sectors looking for the next Philip Morris – the next company that will pay out handsomely to hold their stock because no one else will buy it.

That’s why I enjoyed the headlines around the recent collapse of the Clear Channel deal. This one appeared in Fortune magazine: “Clear Channel’s Prospects Look Grim.”

The article continues by telling us why the radio business is dead. Then, for good measure, it tells us why the newspaper business is holding on for dear life and why the TV business is at death’s door.

The article leads you to believe there’s simply no hope for the media business. And when there is no hope, I sense opportunity for a contrarian strategy.

Let me make a prediction…

• After I die (and I am only 47 years old) people will still listen to radio, they will still read newspapers and they will still watch TV.
• By the way, similar prognosticators said the same of the movie and radio businesses when TV was invented.
• They both still exist… even after the Internet has come along and led to the prediction of an end to all these businesses.
• These media businesses will not only change, but adapt.

The winds of Creative Destruction are blowing, as Joseph Schumpeter would say, but the best businesses adjust and change with those winds. Right now, I see remarkable value in the media space. So let’s look at the numbers instead of the headlines…

4 Media Firms To Consider In Any Contrarian Strategy

Clear Channel (NYSE: CCU), with its “grim prospects,” grew revenues 5.5% last year. How many businesses do you know of on the verge of disappearing that are growing revenue? Granted, the revenue from radio was shrinking – by about 2%. But Clear Channel has 870,000 billboards scattered across the landscape and this business is booming. New technology, which allows billboards to change messages by the minute, is powering a revival in display advertising.

The operating margins in this business are 25%. All Clear Channel has to do to see clear sailing ahead is do what the private equity buyers would do. They would slash expenses, besides selling underperforming assets. Then they would take the money, pay down debt, or give themselves a hefty dividend.

Now, how tough can that be? I expect that they could fetch $8 or $9 billion for the outdoor advertising business alone. That single transaction could pay every last dollar of Clear Channel’s debts. The reason private equity firms wanted Clear Channel is because they smell profits. At 15 times earnings, and with the best assets in radio, Clear Channel below $30 a share is a steal.

Other media firms I think deserve a look are:

• Gannett (NYSE: GCI),
• Citadel (NYSE: CDL),
• And Time Warner (NYSE: TWX).

As the Olympics and Election of 2008 draw closer, these firms will show increasing earnings and depressed growth will rebound.

Radio is a “drive time” phenomenon, and drive times are increasing on our already congested roads. All four companies own outstanding assets and should flourish in the Internet era. Major media firms own some of the best Internet assets besides having the ability to tailor the news to local interests.

When the markets turn, the oversold stocks of media firms are going to come roaring back with a vengeance.

Good investing,

Floyd

Floyd Brown, a regular contributor to Investment U and The Oxford Club, began his highly successful investing career while still in high school… and made his first million before turning 30. Here are five more of his energy picks.

During the previous nine years, the benchmark Standard & Poor’s 500 Index has essentially traded flat, posting an annual decline of 0.37%. By contrast, during the same time frame, treasuries have climbed 4.7% per year and commodities and real estate have fared even better still. The Wall Street Journal referred to this period as “The Lost Decade” for stocks.

The message here: Don’t let “buy-and-hold” become “buy-and-forget.”

Employ the Money Morning investment strategy. Monitor your portfolios for rebalancing opportunities and achieve greater diversification by considering allocations to such non-traditional asset classes like commodities and real estate. And most important of all, capitalize on the faster growth of the global markets.

Market Matters

Financial stocks were again the headline-makers of the week [What else is new?], as shares of The Bear Stearns Cos. (BSC) rebounded a bit when JPMorgan Chase & Co. (JPM) upped its offer for the company by fivefold.  Don’t think other institutions are ignorant of the U.S. Federal Reserve’s recent “creative” moves [most folks would refer to them as "bailouts"]. Indeed, quite a few financial-services firms are probably in the hunt for a bargain-basement buyout of their own. Wells Fargo & Co. (WFC) Chief Executive Officer John G. Stumpf was honest enough to say said that he “would not be averse to a Fed-assisted transaction… fixer-uppers don’t bother us.”

Even the Bush administration set aside its long-standing policy of “less government” for the time being as U.S. Treasury Secretary Henry Paulson admitted that the investment community would benefit from more regulation and greater oversight

Analysts took turns dissecting each other this week as Lehman Brothers Holdings Inc. (LEH) reduced estimates on Citigroup Inc. (C) and Bank of America Corp. (BAC); Oppenheimer Holdings Inc. (OPY) cut earnings forecasts on Merrill Lynch & Co. Inc. (MER); and Citi increased its rating on Lehman after that company’s shares plunged on rumors of ongoing, Bear Stearns-like challenges. Of course, Lehman claims short-sellers were behind the nonsensical talk as they looked to profit from the wild price swings.

Outside the financial sector, news from the retail sector was mixed last week as Tiffany & Co. (TIF) boosted its earnings guidance for the year and Walgreen Co. (WAG) reported stronger-than-expected second-quarter earnings. On a sour note, J.C. Penney Co. Inc. (JCP) lowered its expectations for future sales and profitability as the economy has hindered consumer activity. Techs suffered some disturbing news last week, as Oracle Inc. (ORCL) announced disappointing sales numbers and Google Inc. (GOOG) said that its “paid click data” was lower than anticipated for the second month in a row.  The jury is still out on the proposed $19 billion Clear Channel Communications Inc. (CCU) privatization transaction, as banks and private-equity firms haggle over funding terms.

Oil prices rose again last week as lower inventory levels brought renewed fears that the dwindling supply would be not keep up with summer demand.  Additionally, an attack on a key pipeline in Iraq added more “fuel to the fire.”

Then again, a slowing economy and oil at better than $105 a barrel should serve to dampen demand. Investors welcomed word of the new-and-improved JPMorgan/Bear Stearns deal, but were disappointed by the continued sluggish economic data and the pessimistic announcements by a few tech giants.  So despite the market volatility, certain investors were again treading water as some major equity indexes ended the week not far from where they opened.

Has anyone acquired the copyrights on “The Lost Decade” yet? We think it would make for some wickedly cool T-shirts…

Weekly Economic Calendar

Economically Speaking

So maybe a celebratory parade in honor of the February existing home sales data [best showing in a year] was a bit premature? While some analysts began proclaiming the “beginning of the end” of the housing slowdown, a few new releases dampened their moods considerably as the week progressed.

A related report showed that new home sales in February dropped to the lowest level in 13 years. Further, the S&P/Case-Shiller index depicted the worst decline in home prices since 1987 [when the index was created].  Likewise, the manufacturing sector took a hit last week as durable goods orders surprised analysts by falling much more than expected, while consumers remained in hibernation with the Consumer Confidence Index suffering its poorest showing in five years.

The final reading of fourth-quarter 2007 gross domestic product (GDP) confirmed earlier reports of extremely feeble (+0.6%) economic growth – though many analysts believe the current quarter will prove to be even worse. With all the talk about recession, many are predicting negative growth for this year’s first quarter – and possibly beyond.

Bear in mind, none of the current numbers reflect any of the recent creative moves the Fed has initiated over the past few weeks in an attempt to jump-start the economy [or at least to prevent additional carnage in the U.S. financial sector]. If U.S. Federal Reserve Chairman Ben S. Bernanke can work some magic, the downturn [dare we say recession?] will be short-lived, and that celebratory parade will be in order soon.

By William Patalon III
Executive Editor
Money Morning/Money Map Report