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Invest in Spanish-Language Media
06/12/2015 7:00 am EST
Next to English, the language most spoken in the US is Spanish, with nearly 40 million speakers; this offers enormous opportunity to Spanish-language media in the Americas, suggests Stephen Leeb, editor of The Complete Investor.
Our favorite stock in this arena is Grupo Televisa (TV), which offers a full array of Spanish-language media and entertainment.
Approximately 85% of revenues come from Mexico. And while Mexico's economy has somewhat disappointed over the past year, or so, projections point to growth above 3% over the next several years.
A peppier Mexican economy will provide a clear boost to Televisa. But what should move the needle more than anything is faster adoption of both cable and pay TV throughout the Spanish-speaking parts of North America.
Currently only 50% of Mexicans have access to pay TV. That's a very low number and a great opportunity for Televisa.
We also expect that—in both the US and Mexico—the Spanish-speaking population will be adopting cable at an accelerated rate. Over the past three years, Televisa's revenues from cable television have risen 40%, equating to an annual growth rate of 12%.
Keep in mind that Televisa is a vertically integrated operator, which means that increased penetration of higher-priced media leverages the value of its content.
The company has a solid balance sheet, and despite heavy infrastructure spending, has generated positive free cash flow for at least the past five years. Indeed, for the 12 months ended in March, the free cash flow yield was over 7%.
Few media companies have such a large and vertical opportunity within a captive audience. Long-term growth approaching 20% is a well-measured projection and should lead to market-beating returns.
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