Viacom Inc. (VIAB-Q)

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.

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.

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.

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.

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.

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.

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.

(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.

(Market Call Minute.)

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.

He would like to own the entire media space if he could. Thinks there is a battle on who is going to win. Owning a basket of these is a way to play it. Dividend yield of 3.65%.

The owner is over 90 years of age now. The Guest sold after 2013. People worry about other forms of media delivery and would they bypass cable. It has the burden of a fairly unpredictable owner. If the owner left, the stock would be revalued upward. There is a big shift going on with cable cutting. The shortage these days is content and sports is important. It is really underperforming DIS-N, which he owns.

(A Top Pick Aug 5/14. Down 46.21%.) Has been hit really hard lately, but feels it has been overplayed and overdone. They get 50% of their revenues from advertising and 50% from affiliated fees. Thinks the assets are worth double what the stock is trading at. Trading at only 6X next year’s earnings, which makes no sense.

The media sector rolled over last week. It is very tied to the cable bundles. The way people are consuming media is changing but it won’t change overnight. He has DIS-N.

Has owned for a long time, and it has meaningfully underperformed, but there are some great reasons you should take another look at it. There is some potential for consolidation with CBS. The company is finally focusing on following the Disney (DIS-N) model and spending a lot of money. Thinks some of the advertising comps will improve. There is a lot of hidden real estate. Only trading at about 10X earnings and about10X free cash flow. Dividend yield of 2.42%.