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Sinclair Broadcasting Group: An Investor Analysis for Progressives

Sinclair Broadcasting Group: An Investor Analysis for Progressives

By

Sheldon Drobny

 

 

As a venture capitalist and fund manager I have had the experience to recognize a good value stock when I see it.  Sinclair Broadcasting Group (NADAQ: SBGI) has had a bad year as is evidenced by the following chart:

 

Sinclair Broadcast Group'A' (SBGI)

7.29  +0.18 (+2.53%)

as of 10/15/2004 at 12:25PM EDT (NASDAQ Delay: 15 mins.)

 

As the co-founder of Air America Radio (AAR), I have learned a lot about broadcast media and the decline in markets and advertising caused by management that does not have a vision for growing markets.  One of the major issues we had when we started AAR was the lack of available radio stations that understood that the best and most loyal audience for advertisers is educated progressive people.  These people used to be called YUPPIES, but there is a growing trend in America that TV and radio broadcasters are missing.  This educated and mostly secular audience buy a lot of stuff we call adult toys.  They are the best audiences for advertisers.  

 

Sinclair has done very poorly in the last few years because the CEO and founder has his own political agenda and is not programming what is in the best interest of the company.  Here is a profile of Sinclair:

 

 

 

 

 

10706 Beaver Dam Rd.
Hunt Valley , MD 21030
http://www.sbgi.net

Phone: 410-568-1500
Fax: 410-568-1533

Sector: CONSUMER CYCLICAL

 

Industry: Television Station Groups

Sinclair Broadcast Group (SBG) is all about TV now. The company owns or provides programming to more than 60 TV stations in about 40 markets, reaching nearly 25% of US households. SBG, which focuses on local advertising revenue, has affiliates for all the major networks (ABC, CBS, NBC, FOX, UPN, and WB), allowing access to first-run programming. The company sold some 55 radio stations to Entercom Communications so it can focus on television. It also has been investing in Internet firms. The four sons of founder Julian Sinclair Smith (including chairman and CEO David Smith) control about 95% of the company.

 2003 Sales:

 1 Yr. Sales Growth:

 2003 Net Income:

 2003 Employees:

 +738,700,000

 +1.00%

 +24,400,000

 

 

 

Managing a public company creates an enormous fiduciary responsibility.  Under the  recent Sarbanes/Oxley legislation to fight corporate corruption and cronyism, the CEO of a public company has a much greater responsibility for the proper stewardship of the company.  In this case, it is clear that David Smith, the CEO has done a terrible job of producing revenue for the TV stations owned by Sinclair.  And due to the Communications Act of 1996, the asset value of radio and TV has soared dramatically.   Therefore, David Smith should be held responsible for the poor performance of the company stock because of his lack of objectivity in utilizing his TV licenses to provide the most revenue and market value for his shareholders. 

In my opinion, the company will be forced to change its programming or sell it’s valuable TV licenses to another company if Mr. Smith does not get his act together.  He has a lot of institutional investors that probably have lost lots of value because of his bad programming decisions.  Here is a list of those institutional investors:

Top 20 Holders

Institutions

Shares Held

Change

% O/S

Turnover

Style

EARNEST Partners, LLC

4,946,278

151,630

10.80%

Mod

Core Value

Gabelli Asset Management Company

3,960,000

270,500

8.64%

Low

GARP

Westfield Capital Management Company, Inc.

2,616,950

-35,950

5.71%

High

Core Growth

Morgan Stanley Investment Management Inc. (US)

2,526,303

-7,686

5.51%

Mod

GARP

Neuberger Berman, LLC

2,266,809

-1,293,134

4.95%

Mod

GARP

Putnam Investment Management, L.L.C.

2,081,861

221,730

4.54%

Mod

Core Growth

Perry Capital, L.L.C.

1,911,452

511,452

4.17%

High

Hedge Fund

Barclays Global Investors, N.A.

1,801,161

100,128

3.93%

Low

Index

Janus Capital Management LLC

1,417,887

-152,303

3.09%

Mod

Aggres. Gr.

Vanguard Group, Inc.

1,146,836

77,101

2.50%

Low

Index

INVESCO Capital Management Inc.

1,118,958

130,338

2.44%

High

Core Value

Columbia Management Advisors, Inc.

1,094,830

-6,200

2.39%

Mod

GARP

J.P. Morgan Investment Management Inc. ( New York )

793,242

-175,000

1.73%

Mod

GARP

BlackRock Financial Management (Value)

788,200

229,200

1.72%

High

Deep Value

State Street Global Advisors (US)

678,530

-36,003

1.48%

Low

Index

TCS Capital Management, LLC

656,500

0

1.43%

High

Hedge Fund

BlackRock Financial Management (Growth)

640,235

321,975

1.40%

High

Growth

Liberty Ridge Capital, Inc.

572,100

-277,100

1.25%

High

Momentum

Kirr, Marbach & Company, LLC

564,635

6,700

1.23%

Mod

GARP

Trinity Investment Management Corporation

503,200

250,800

1.10%

High

Deep Value

 

 

 

 Sheldon Drobny is CPA and Venture Capitalist and co-founder of Air America Radio; email at sdrobny@paradigmventure.com

 


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