Its famous brand names include CBS, MTV, VH1, BET, UPN, Nickelodeon, Infinity Broadcasting and Paramount Pictures. It also owns 81 percent of video-rental retailer Blockbuster, which it hopes to spin off later this year.
But here’s the executive plot line:
Mel Karmazin, once expected to be the eventual successor to 81-year-old Chairman and Chief Executive Sumner Redstone, made a surprise exit as president. He’s a respected champion of shareholder value and a genius at forming mergers.
Next, Jonathan Dolgen is leaving his post as chairman of the firm’s entertainment group. His role had been diminished when Redstone replaced Karmazin with the duo of CBS chief Leslie Moonves and MTV Networks CEO Tom Freston.
Thus either Moonves or Freston could be the possible Redstone successor.
Observers will watch closely to see whether the cable or the television business turns in the best financial results. Meanwhile, because Redstone controls Viacom through his closely held firm National Amusements Inc., he continues to call all the shots.
Shares of Viacom (VIA.b) are down 17 percent this year following last year’s 9 percent gain. That weak performance seems to disregard the recent quarter in which the firm’s overall advertising sales were up 21 percent. Revenues from cable rose 21 percent and television 18 percent.
Heavy dependence on advertising revenue does make the company’s revenue stream quite volatile. Viacom is expected to remain on the acquisition trail, the same way in which it has grown in the past.
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The consensus on Viacom stock from the Wall Street analysts who track it is a “buy,” according to the Boston-based First Call research firm. That consists of 17 “strong buys,” 13 “buys” and three “holds.”
Viacom earnings are expected to increase 19 percent this year, versus a 76 percent gain forecast for the broadcasting industry. Next year’s projected 13 percent gain compares with the 97 percent expected industrywide. The five-year annualized earnings increase for the company is expected to be 14 percent, compared with the 17 percent forecast for its peers.
Q. Artisan Mid Cap Value Fund was recommended to me. I’m a long-term investor and this doesn’t have a very long record to judge. What is your opinion of it?
A.C., via the Internet
A. It’s a “newbie” but a “goodie.”
This fund was started in March 2001 and, after a rocky start, its current portfolio managers came on board the following November. They brought with them extensive experience in running the Artisan Small Cap Value Fund.
The $52 million Artisan Mid Cap Value Fund (ARTQX) gained 24 percent over the past 12 months and had a three-year annualized return of 9 percent. Both results rank in the top third of mid-cap value funds.
“This fund is looking for companies selling at what it considers to be undemanding valuations relative to their assets or ability to generate earnings,” explained Paul Herbert, analyst with Morningstar Inc. in Chicago. “Sometimes investing in unloved and forgotten names can lead to periods of underperformance, but that hasn’t happened here yet.”
Disciplined portfolio managers James Kieffer and Scott Satterwhite seek out 40 to 60 cash-producing companies selling at low prices and trade shares infrequently. Both continue to run Artisan Small Cap Value as well, investing their own money in the funds. They worked together at Wachovia before joining Artisan in 1997.
A mid-cap value fund is typically considered a secondary holding, rather than a core holding, in an individual’s portfolio. It would, for example, be a solid complement to a large-cap fund.
Among its major portfolio concentrations, nearly 40 percent of Artisan Mid Cap Value Fund is in financial services, while energy represents 19 percent and consumer goods 18 percent.
This “no-load” (no sales charge) fund requires a $1,000 minimum initial investment. Its 1.59 percent annual expense ratio, while not extravagant, is not especially cheap, either, Herbert noted. However, fees are expected to decline as the fund’s assets grow.
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].