Time Warner strong despite its problems

Taking Stock

Your Money

April 10, 2005|By ANDREW LECKEY

Q. I'm a fairly aggressive investor and own a few media stocks, including Time Warner Inc. What is the outlook for the company?

- R.A., via the Internet

A. There's always plenty going on at this media and entertainment giant, though not all of it has benefited shareholders.

While Million Dollar Baby hasn't been the box-office smash that Lord of the Rings: The Return of the King was a year ago, the boxing film directed by Clint Eastwood did take home four major awards on Oscar night. The Aviator, another of the company's films, also was a big winner.

Meanwhile, problems are being gradually resolved.

The company, without admitting or denying guilt, agreed to pay $300 million to settle Securities and Exchange Commission charges that it inflated AOL advertising revenue and overstated total Internet subscribers. In addition, the firm's latest annual report includes restated financial results for 2001 through 2003.

Time Warner shares are down 10 percent this year after last year's 8 percent gain. The company nearly doubled its net income in the fourth quarter, although sales were up less than 2 percent.

Recent news that Viacom wants to split into two separate units revived interest in Time Warner stock based on hopes that it might consider something similar. However, management responded that AOL is a growth asset it wants to keep.

AOL, even with an eroding subscriber base, is the world's largest Internet service provider. Time Warner Cable, though facing an onslaught from satellite video, is the second-largest cable operator. CNN, TNT, the TBS Superstation, HBO and Cinemax are famous brands, along with magazines such as Time, People and Sports Illustrated.

The consensus recommendation for Time Warner shares is a "buy," according to the First Call research firm. That consists of seven "strong buys," nine "buys" and eight "holds."

Q. What's the easiest way to invest in individual foreign stocks?

- V.H., via the Internet A. About 1,500 foreign stocks are available to retail investors here as American depositary receipts, or ADRs.

Nearly one-third of those ADRs trade on the NYSE, AMEX or Nasdaq, and they must comply with generally accepted accounting principles, Sarbanes-Oxley disclosure rules and requirements of the exchanges. You can buy them as you would any other stocks.

The rest, even though they may not necessarily represent small companies, trade over-the-counter as pink sheets and needn't meet those financial requirements.

"The ADR basically serves to Americanize foreign investing because not all brokers could help you directly access foreign markets and may charge a higher commission to do so," said Julio Lugo, vice president of broker and institutional marketing for the Bank of New York.

Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney@tribune.com.

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