DHX Media (DHX.B.TO)

This has been a strange year. It has done so well in the last 3 years that it has been neglected. It is not the kind of stock people are focusing on, like value stocks, cyclicals and commodities. She doesn’t see anything wrong with their numbers, so she is hanging on.

He sees value in the sector. They have growing cash flows and are paying down the debt. He thinks at some point it might be taken out. They have been under pressure recently because of acquisitions.

Put out a somewhat disappointing quarter in that they paid on top line. The EBITDA margin wasn’t as strong as the street consensus was, because they were spending more on Teletubbies as well as buying more content for DHX Television. He is hoping he can get this on a little bit more of a pullback. Looking out to 2017, the challenge in Canadian small cap is that there are very few companies that are able to put up positive 10%-15% organic EBITDA growth.

He would avoid this stock until the downtrend is broken. It has to take out the last high.

Children’s media. He likes this company. It has not been the greatest performer over the last year. Even their most recent quarter reported last week was lacklustre. The guidance for 2017 is looking better. They are expecting double digit earnings growth over the next year. They have kind of put some investments behind them now, and he thinks they are going to start reaping the benefits.

He has not been involved for the last couple of years. They recently came out with numbers. Their cash flow growth was not there. Stay away from this one. Cap-X is likely to go up as they build a studio.

Has this as a Short. They have a pretty wide range of kids’ content, but for him it is a combination of valuation and price momentum. Bounced off its lows after missing a few quarters. Valuation is expensive at 16X EBITDA. PE of 28X, and they don’t have the growth to support that.

A great model, and a very, very important company globally. It has captured everything outside of the Disney (DIS-N) type level in children’s programming. There is nothing he can identify that is wrong with this company. The quality continues. Sometimes you have to exhibit patience.

This develops kids content, and they cross sell it very well in various channels. Content is value, and you can sell content to various channels. Trading at a big discount to the rest of the group at 10X operating cash flow. It’s cheap, and at a point, it gets taken out. Well capitalized. Dividend yield of 0.85%.

He likes this. You need to have a 10-year timeframe on this. Management has done it all before with their prior companies that they sold. Have signed very good deals and have signed licensing partnerships, and have worldwide media partners. Their library is starting to increase in value. But it is a quiet company, and is not that sexy. They produce children’s shows. Has a tiny dividend which they can probably increase a little more. If you own it for 4-5 years, you might get a little bit frustrated.

One of the largest children’s content owners. They get paid every single time a child watches a show. They have a significant YouTube strategy.

Expected to earn $.35 in June/2016, growing to $.40 in 2017, about a 15% lift. Dividend is probably as big as you are going to see in the near term. They grow by acquisition, and it should continue to do well. Has a library of children’s videos, which they can continue to build out at almost no cost. They hope to get big enough that someone like Disney (DIS-N) will buy out their videos. There is also the potential of someone like Netflix (NFLX-Q) taking a run at them. Stock seems to be relatively expensive.

He was Short this for quite a long time and made good money on it. He would love to be able to Short it again and he is hoping that it pops a little. The issue he has is the lack of free cash flow. It is often able to show EBITDA growth, but the issue is that the “DA” in EBITDA is a very high number, and they need to be continually investing in more content. As a result, there is never any extra cash left over at the end of the day. It is sort of a treadmill that they can’t get off of.

Very interesting a very well-managed. Had quite a run consolidating children’s content, making acquisitions and doing a hell of a job monetizing it with the new trends towards streaming content. The stock was always too rich for him. Their top line is slowing down a little. They bought the family Channel from BCE (BCE-T) and are losing subscribers because all the Disney (DIS-N) content that was on this channel has gone over to Corus (CJR.B-T) now. Starting to give this a hard look because the valuation is becoming more reasonable. Still expensive for a value investor, but thinks they have a lot of value in some of their assets.

Has been buying this aggressively in the last couple of weeks. They did a financing earlier this year at $7.50, which fell a little flat. Last quarter was a bit of a miss, but they were still suffering a little with the loss of the Disney (DIS-N) contract a year ago. They have refilled the content side very well, and that is a bigger part of their business right now. The stock is looking exceptionally cheap compared to others in the sector.