News Corp combats the slump

Written by Gillian Wee | Updated: Sep 30 2008, 07:49am hrs
News Corp is attracting value investors and so-called quant fund managers after losing more than one-third of its value this year, a sign the selling in Rupert Murdochs media company may have run its course. We think its near the bottom, said John Sini, a fund manager at Douglas C Lane & Associates in New York. The firm, with $2 billion in assets, has added to its more than 800,000 News Corp shares in the past two weeks, taking advantage of a sell-off caused by financial-market turmoil.

Murdoch redesigned the Wall Street Journals website to help boost subscription revenue by a target of more than $300 million a year. Hes also expanding the cable and interactive units while US advertising is in a slump. News Corp is at its cheapest ever, based on the price- earnings ratio and measures of cash flow and leverage, Sini said. The P-E of 10.3 will rise in the next six months with the start of an economic recovery and eventually reach the high teens, he said. Quantitative money managers including Analytic Investors LLC in LA have bought the shares. Its looking cheaper on a valuation basis in terms of earnings yield and cash flow-to-price, said Gregory McMurran, chief investment officer at Analytic, which has more than $11 billion under management. His firm bought more than 9 million shares in the second quarter, according to Bloomberg data.

Earnings yield is per-share profit divided by the stock price. News Corp launched the new website and the luxury-lifestyle magazine WSJ as well.

The Journal, and Dow Jones were grossly undersold, Murdoch said at a conference in New York. News Corp also is relying on cable networks such as Fox News, Sky Italia and the Fox Interactive Media group that includes MySpace to counter weakness in advertising at newspapers and local television stations. I hope theyre right, Murdoch said of some investors view that News Corp is near a bottom. Mutual funds Dodge & Cox and Capital World Investors are the top investors, while hedge funds including Chris Shumways Shumway Capital Partners LLC, Richard Perrys Perry Corp and Leon Coopermans Omega Advisors Inc were sellers. Murdochs long-term strategy is one hes exhibited over the last decadeto bolster and diversify himself, Sini said. Theyre not getting credit for what theyre doing.