DHX Media (DHX.B.TO)

Has put itself up for sale. With Canadian content there are only a few selective buyers. That really restricts it. On the other hand, they would have to break it up which becomes complicated. He’s wondering if 1 or 2 Canadian buyers have kicked the tires, maybe there is a story out there that nothing is going to happen. He doesn’t hear anything, and maybe the silence is deafening.

(A Top Pick Oct 12/16. Down 28.4%.) Pulled the plug on this just after they reported earnings. The positive is that they are still an asset story. When you look at the value of content out there, you could argue there is still $20 of valuation. The problem is, they levered up to make the Peanuts acquisition.

Kind of a rollup story. These stories always work well at first and then almost always fall apart, because it is hard to acquire businesses. They did a bunch of acquisitions, which worked out great until inevitably the wheels fell off. The question is, what are they going to do with this dog’s breakfast of assets. They are in the media space, and those assets tend to have long life, so they might get lucky, but he would be cautious.

(A Top Pick July 29/16. Down 14.92%.) He liked this for the growth prospects of Teletubbies. It got pretty good traction in the UK, but the US was pretty disappointing and that’s when he sold the stock.

The great original in the non-Disney type company. It is Canadian. Great animation programming.

Looks cheap, but it has looked cheap for quite a while. Canadians have trouble valuing this. There is really not much else like it in Canada. They’ve made some recent good transactions. They need consistency of a few quarters bringing the numbers they say they can do, and the stock will slowly go up.

He follows it closely for the children’s content space. They did a great job of monetizing content. They have been on an acquisition binge and have to keep acquiring content to keep the ball rolling. They have quite a bit of debt and have to pay that down quickly. The stock has come down a lot and it is coming close to a buy.

Just made a large acquisition of Strawberry Shortcake and Peanuts. In the last while, there has not been a lot of positive cash flow from the properties they have. A lot of their properties are older and are not the hottest, so they are trying to rejuvenate them. He is staying on the sidelines.

(A Top Pick May 27/16. Down 7%.) Just did a big stock issuance to buy Strawberry Shortcake and Peanuts. They are taking an oldish brand and re-digitalizing it. Sold this quite some time ago and is looking to possibly get back in again.

Just met with them 2 weeks ago after they came out with disappointing earnings. The stock came down by 10% or more after that. They are not showing the cash flow that people want to see. Haven’t had any big hits. Other companies have done a really good job in creating some new shows, and garnering a lot of revenue from the toy business.

He likes this. To him it is almost a mini Disney. Content is king, and they own children’s content, which has a longer life than a lot of others out there. They are doing a better job distributing into other media as well. He likes the assets they have. The balance sheet is in better shape. They are starting to generate free cash flow again, and the operating cash flow looks good.

From what is being said, he has a feeling they are not going to report particularly aggressive earnings until the 4^th quarter of 2017. You have to be patient. Expects this quiet period will be continuing over the next few months.

This has been a bit of a laggard lately. They do media licensing content for children’s television shows. Has had really good success with Netflix, Amazon Prime, etc. Have also had a lot of success with YouTube. He likes this and thinks things are going to turn around in 2017. They have some contracts coming on with DreamWorks, Mattel and more, so closer to the end of 2017 they’ll have more content going out. You may need to wait a few months, but thinks the pastures are greener going forward.

Content is still king. This is one of the best growth stories in media. Kids’ content lasts forever. They actually did a reselling agreement into China not too long ago. Some of this stuff does well internationally. They are paying down the debt and generating free cash flow. Dividend yield of 1.03%. (Analysts’ price target is $9.72.)

Has been a little frustrating. It has children’s animation programs and an international library so there are no language issues. Management knows what they are doing. The library has great value. Raised their dividend a couple of times. But the stock is just languishing. A little expensive. A 5-10 year type of story.