Barry Schwartz Viacom Inc. VIAB-Q TOP PICK Jun 15, 2015

Netfix has eliminated a huge amount of market cap from the industry. $59 with 32% upside is his model, but if it has a negative transit, then it will move even lower.

(Market Call Minute.)

(Top Pick Jun 15/15, Down 30.22%) He rode it down. This was his value trap. This one was cheap for a good reason. Everything they do seems to be wrong. At some point all the bad news will be priced in and some catalyst will take the stock higher. There are assets in the company that are worth a lot more than the company is trading for.

This is great to hold onto. They have some great drama going on. Don’t sell. She might buy when these things are figured out. You have a company with some great assets.

The founder is 93 years of age and is reluctant to give up control even though he is far from capable of running the company. If he passes on then you could make a lot of money in the company. It is a cheap stock.

The Viacom story is more interesting than “The Game of Thrones”, and unfortunately just as painful. They kicked out the CEO, and it was thought there was going to be a merger with CBS which is not going to happen. Doesn’t know what this company’s problem is but they don’t seem to want to create shareholder value.

He continues to be a buyer of this. They own significant assets such as MTV, Nickelodeon, Paramount Studios, assets that are worth something. Consumers are changing viewing habits of television. They are streaming through YouTube, using more Facebook and Twitter. The model of going right to the cable TV to view programs has gone down a lot. However, the sum of the parts is worth more than what they are currently trading at.

Rumours are flying that Cherry Redstone wants to merge this with CVS, and all the analysts are predicting that would be a huge mistake, because this is not investment grade. They are rated BBB, but could drop to BB, which would be junk status. The dividend was reduced last year from $1.40 to $.80. He wouldn't want to own this.

How can you tell when a stock that has been in a downward trend starts a new trend? The first thing you look at is if the stock has made a new higher low. If it gets above $48 it could get very explosive. He expects a lot of gnashing if the stocks get to $34 - $38.

Merging with CBS. Third-rate movies. Lots of free cash flow. Wants to own the best companies for the long term, and this one doesn't fit the bill.