Discovery Communications Inc (DISCB-Q)

Today, Wall Street hailed news of the AT&T and Discovery merger as a transformational blockbuster, but he sees it as the final act in one of the dumbest deals in recent history, AT&T's $85-billion buy of Time-Warner of nearly three years ago. Why would a telephone company buy a media business? Synergy? Really? AT&T took on huge debt. The dividend has been slashed in half. This is a tremendous destruction of value. A disgrace.

(A Top Pick June 29/15. Down 17.81%.) The worry is that prior to buying Eurosport, they may not have the best properties and will lose some subscribers to competition, and money they get from distributors will decrease. They will be reporting shortly, and depending on that he may get back into the name.

European broad pass for all forms of Olympic coverage. 3 billion subscribers in 20 countries. No dividend, but they could pay one. It could even get acquired. Investors are concerned about US advertising. They have upcoming negotiations with Comcast. He thinks they will secure rights for many forms of distribution.

A media company in the US. It and the others have really fallen on hard times. The narrative is that the affiliate fees they are getting for cable is going to lessen over time, and new cable channels don’t want to carry them. That is not new news and is already reflected in current prices. There are a lot of smart people involved in these investments. He feels there is going to be some consolidation. Media companies generate so much free cash flow and CapX is minimal. They generate enormous amounts of free cash which they use to buy back stock, make acquisitions and increase dividends. If you are a value investor, this is an area to be looking at.