Although his firm may be best known for guiding clients to municipal bonds, Bernard Beal is widening his view. The chief executive of M. R. Beal & Co. leads a team that provides investment banking, financial advisory services, securities trading, and equity research on industries including communications, entertainment, financial services, and healthcare.
content-custom-banner ampforwp-incontent-ad1">Beal’s investment approach involves having a diversified portfolio that includes stocks, bonds, and some cash. These days, Beal is leaning toward entertainment and media stocks for long-term growth. “I think the economy is still a little tenuous, and the war in Iraq has made it somewhat difficult for people psychologically,” says Beal. “There seems to be a feeling that the country needs firmer leadership. In tough times, people turn toward entertainment.” Additionally, Beal notes that young people use several forms of media simultaneously.
Among entertainment and media companies, Beal shows interest in Sirius Satellite Radio Inc. (NASDAQ: SIRI). Sirius has attracted subscribers at a faster rate since signing the controversial shock jock Howard Stern. Although the company’s sound quality isn’t as good as its only competitor, XM Satellite Radio, Beal believes, “If they make improvements, they will have the chance to add even more subscribers.” He adds that the company’s market capitalization makes it a potential candidate for acquisition, which could also boost its value.
Shares of
media and entertainment conglomerate Time Warner Inc. (NYSE: TWX) have great potential, says Beal. Time Warner owns America Online; publishes magazines such as People and Sports Illustrated; operates CNN and Cartoon Network; owns New Line Cinema, maker of films such as the Lord of the Rings trilogy; provides high-speed Internet, cable television, and digital phone service; and publishes books by best-selling novelist such as James Patterson.The company’s acquisition of AOL “did not go as well as expected,” says Beal, but AOL remains attractive. In December, popular Internet search engine Google Inc. purchased a 5% stake in AOL for $5 billion, a deal that will make more of AOL’s content available to Google users. “It’s a great stock and it’s under $20,” says Beal. “The company is going through a metamorphosis.”
Another player in the entertainment arena is Lion’s Gate Entertainment Corp. (NYSE: LGF), maker and distributor of Crash and Madea’s Family Reunion. Lion’s Gate distributes DVDs, and produces cable television series such as Missing and The Dead Zone.
“The thing I like about this company is that they keep production costs low,” Beal explains. “They got a great deal of attention for Diary of a Mad Black Woman-that film made a fortune and it cost nothing to make.”
Beal also likes 24/7 Real Media Inc. (NASDAQ: TFSM), a
provider of Internet advertising services. The company’s stock rose nearly 70% in 2005. “It has had a tremendous run,” he says, noting that the rapid growth of Internet advertising makes 24/7 an attractive candidate for an acquisition.Beal’s final pick, AVI Biopharma Inc. (NASDAQ: AVII), a developer of therapies for the treatment of cardiovascular diseases and cancer, is his one venture away from entertainment. The company is particularly attractive, Beal says, because it may have developed a drug that fights several strains of influenza, including the avian flu-also know as bird flu. “This could be huge.”
BERNARD BEAL’s Stock Picks
|
Company(Exchange: Symbol) |
Price* |
12- to 18-Month Price Target |
P/E on Projected 2006 Earnings |
Est. 5-Yr. Annual EPS Growth Rate |
Why Stock Will Outperform |
| Sirius Satellite Radio Inc. (Nasdaq: SIRI) | $5.92 | $9.00 | N/A | 27.5% | The company is attracting subscribers faster than competitor XM Satellite Radio. |
| Time Warner Inc. (NYSE: TWX) | 17.15 |  25.00 | 19.5% | 13.0 |  Time Warner is making changes after a  disappointing AOL acquisition. |
| Lion’s Gate Ent. Corp. (NYSE: LGF) | 9.20 | 12.50 | 19.6 | 15.0 | Lion’s gate keeps production costs low. |
| 24/7 Real Media Inc. (Nasdaq: TFSM) | 9.48 | 14.00 | 24.6 | 37.0 | Company should benefit from a rapid rise of advertising on the Internet. |
| AVI Biopharma Inc. (Nasdaq: AVII) | 7.41 | 18.00 | N/A | N/A | AVI may have a drug that fights several forms of influenza, including bird flu. |
* As of Jan. 25, 2006