This is an excellent time to go hunting for unloved, ignored, and deeply undervalued companies trading for far less than the value of their assets and cash flows, suggests Tim Melvin, editor at Investors Alley's The 20% Letter.

Gray Television Inc. (GTN), which owns TV stations, is an excellent example of a stock that can return several multiples of the current stock price. No one cares about the stock right now, largely because no one cares about TV stations.

I get the streaming and cord-cutting story. Nevertheless, traditional broadcast networks are still catching more eyeballs every day than any of the streaming services.

According to a recent report from Gabelli and Company, streaming service subscribers have fallen from a high of 100 million to less than 80 million today. Household penetration has fallen from 80% to less than 60% nationwide.

Gray Television owns TV stations affiliated with the four major networks, CBS, NBC, ABC, and FOX, in 113 markets across the United States. The stations owned by Gray reach 36% of the U.S. population. It is the second-largest broadcaster in the country. According to comments from CFO Jim Ryan, most of the company’s stations are the number-one or number-two rated stations in their market.

Gray also owns studios, sports broadcasting, an online business, and a digital content business. The real story, however, is the television stations. This company has produced more than $3.6 billion in revenues and generated more than $600 million in free cash over the past year. Management uses the cash to pay down debt and reward shareholders with a generous dividend of 3.2%.

All major sporting events, including the Super Bowl, the World Series, the Women’s World Cup, the NCAA Championship, the NBA finals, the upcoming 2024 Olympics, most golf majors, and just about any other major sports event, will be on broadcast TV. All those ad dollars will flow to the companies, including Gray Television, that own TV stations across the country.

TV stations may not be exciting or sexy now; however, they produce lots of cash flow, and a significant tailwind is building, which will increase the cash flows and value of the stations.

If you thought political ads were bad in 2020, brace yourselves: it is more than just the presidential contest — as heated as that will be this time around. All 435 seats in the United States House of Representatives are up for bid, as are 33 Senate seats.

On top of that, there are three gubernatorial elections in 2023 and 11 more in 2024. Countless local and statewide offices will also be contested over the next 15 months. Billions of dollars will be spent on advertising.

In 2020 and 2022, Gray captured more political dollars per household than any of its competitors. It will again in 2024. The corporation owns stations in all the right markets, with a concentration in the eastern half of the United States, where most swing states that will attract massive spending are located.

More money than ever before will likely be spent between now and the first Tuesday in November 2024. And Gray Television will capture a lot of that money. That money will be converted to cash flow to pay down debt and pay dividends. And all of this will lead to a much higher stock price.

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