I like it.

The Seven network currently has about 1.97 billion dollars (approximately 1 billion of which is cash) in equity and 207 million shares outstanding. That works out to about $9.50 of equity per share. The Seven network is currently trading at $6.51 some 30% percent or so lower than their break up equity value. Good margin of safety?

Sure this year they are going to find it tougher to make money in the current advertising market but as time goes on this should improve. TV is still the best way to advertise for most businesses which even Rupert Murdoch admitted this week by blowing the trumpet for paid news sites ie. the sky is not falling in and internet advertising is not taking over the world.

Seven has only 6 million dollars in debt. Against their current equity levels this is like owing only 0.3% on your home loan. And with earnings based on only 30% of last years (a safety factory I conjured from parts unkown), they could pay this debt off seven times over (it all comes back to Seven).

The only issue I see is that they do not earn ‘out of this world’ profits. Based on last years profits the return was about 11% based on the current share price, not the worst ever but not stupendous. They also don’t seem to make many if any losses which is desirable.

I am not sure what they will earn this year but I know Kerry Stokes does not like losing money and has an inkling to earn more in the future. He recently invested in West Australian Newspapers who have somewhat of a monopoly in their area. If you are looking for somewhere to whack a “little bit” in the hope of a market recovery then I can advise you, based on that assumption, Seven has some of my cash. I will keep an eye on Mr Stokes, as blindly following any man is an exercise in stupidity, but if he keeps up the good work I look forward to a reasonable return.

Think of it as a billionare working for you!