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 its 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
