New Buy: WPP Group plc

pocketdooz

Company is the world's largest advertising agency, just ahead of Omnicom.

Been watching it for months now. Latest sentiment from Publicis and the London-based Media analysts is that advertising and marketing declines in the U.K. and U.S. have reached a bottom.

Share price has got hammered naturally but I think there is excellent 12 month upside from current price of £3.99.

Historically the agencies have rebounded with up to 100% equity price increases AHEAD of GDP rebounding. WPP is better positioned than Omnicom, Publicis or IPG due to geographic diversity (#1 in China, huge in India) and the acquisition of TNS last year that moves them toward a more media measurement revenue base than solely advertising-driven.

Any thoughts on this?

pocketdooz

ADR's now up c. 10%.


Also - now going long Omnicom and Aegis.

Likewise for Telefonica.



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Raskolnikov

Telefonica is quite a risky play in my opinion. It seems the recent rally behind the stock is based on a perception that we're over the worst on the recession and that the South American market will continue to grow rapidly.

Personally, Deutsche Telekom is starting to look very tasty to me. Dividend is huugggeee (although it will surely be reduced).

pirelli

Alot of media related companied including print and publsihing have shot up in the last week. SSP almost 100% and LEE 60% in one day and Media 100% in one day.

NYT ( new york times )
LEE
SSP (scribbs )
Gannett
Media General Inc

When it goes green some sectors just jump up, but with the news in britain that the economy might take longer to recover there might or obviously will be future corrections in these big green shoots. Buy low and sell high.


In saying that what is the status of the irish company Independent media.Has that managed to sort its financial woes out. It had an incredible 1.4 billion debt, so i have treated it like dog**** and avoided it although now might be a good time to take a risky gamble on it.

pocketdooz

Raskolnikov wrote: »

Telefonica is quite a risky play in my opinion. It seems the recent rally behind the stock is based on a perception that we're over the worst on the recession and that the South American market will continue to grow rapidly.

Personally, Deutsche Telekom is starting to look very tasty to me. Dividend is huugggeee (although it will surely be reduced).

TEF dividend is 6-7% and expect a huge share buyback in November given what the company normally does. The O2 brand is excellent and LatAM performance has been exceptional. The company is now rolling out triple play in Spain (45% of EBITDA) and even the UK and German markets are performing OK.

Do more work on DT imo - it's a bit of a dog - it has sh1tty brands in sh1tty markets (T-Mobile in the UK and the US - not in the top 2 in either market and competes against bigger companies with better brands and networks in both markets - i.e. Verizon and AT&T in the US and O2 and Vodafone in the UK) - Also the German government owns approx. 1/3 of the equity which supports the rating - big potential future risk imo. Cost of capital could increase if the German govt. decides to offload some of its stake and Moodys/S&P downgrades them. DT and BT are a Sell and Vodafone and TEF are a buy imo.


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pocketdooz

pirelli wrote: »

Alot of media related companied including print and publsihing have shot up in the last week. SSP almost 100% and LEE 60% in one day and Media 100% in one day.

NYT ( new york times )
LEE
SSP (scribbs )
Gannett
Media General Inc

When it goes green some sectors just jump up, but with the news in britain that the economy might take longer to recover there might or obviously will be future corrections in these big green shoots. Buy low and sell high.


In saying that what is the status of the irish company Independent media.Has that managed to sort its financial woes out. It had an incredible 1.4 billion debt, so i have treated it like dog**** and avoided it although now might be a good time to take a risky gamble on it.

It's not fair to compare WPP, OMC and AGS to NYT and Gannett - they are totally different companies. WPP/OMC/AGS do not rely on advertising revenue for all its earnings - it is more heavily involved in media buying and market research (Nielsen-type business model) and can cut costs rapidly by letting go of temp/freelance staff and chopping bonuses. Even though organic revenue was down c.11%, EBIT margins only fell 100bp to 13.9% - just shows that when the market returns, of every incremental dolar earned - a lot of it will fall to the bottom line, given the better cost structure of these companies now.

These agencies will rebound strong AHEAD of any rebound in GDP and you will see anywhere up to 100% return on equity investment in the next 18 months if you buy in now.

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Stay away from Independent - it is a dog.

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pocketdooz

pocketdooz wrote: »

Company is the world's largest advertising agency, just ahead of Omnicom.

Been watching it for months now. Latest sentiment from Publicis and the London-based Media analysts is that advertising and marketing declines in the U.K. and U.S. have reached a bottom.

Share price has got hammered naturally but I think there is excellent 12 month upside from current price of £3.99.

Historically the agencies have rebounded with up to 100% equity price increases AHEAD of GDP rebounding. WPP is better positioned than Omnicom, Publicis or IPG due to geographic diversity (#1 in China, huge in India) and the acquisition of TNS last year that moves them toward a more media measurement revenue base than solely advertising-driven.

Any thoughts on this?

Up 15.6% to yesterday's £4.61

le_dazzler

Hi PD,

Do you think this still represents value at £4.61?

Cheers,
Darragh

pocketdooz

le_dazzler wrote: »

Hi PD,

Do you think this still represents value at £4.61?

Cheers,
Darragh

Yes,

Definite upside over the next 12 months in WPP.

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pocketdooz

Up 20% in 4 weeks to £4.79



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pirelli

pocketdooz wrote: »

It's not fair to compare WPP, OMC and AGS to NYT and Gannett - they are totally different companies. WPP/OMC/AGS do not rely on advertising revenue for all its earnings - it is more heavily involved in media buying and market research (Nielsen-type business model) and can cut costs rapidly by letting go of temp/freelance staff and chopping bonuses. Even though organic revenue was down c.11%, EBIT margins only fell 100bp to 13.9% - just shows that when the market returns, of every incremental dolar earned - a lot of it will fall to the bottom line, given the better cost structure of these companies now.

These agencies will rebound strong AHEAD of any rebound in GDP and you will see anywhere up to 100% return on equity investment in the next 18 months if you buy in now.

.

Stay away from Independent - it is a dog.

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WPP PLc was a nice pick Pocketdooz. Its charging ahead.

If SSP./NYT/MEG are going up is it not reasonable that independent media will also.They are in the same business and in fact Australia is doing quite well. I think it is worth a re consideration and then on the other hand it might take forever to take off...

Meanwhile on the other side of the Pond...


SSP scribbs Has really taken off with a gain of almost 200 % since the last post. Went from 1.35 to 3.36 when i posted last. Now at over $7.70.

Media General, Inc. (Public, NYSE:MEG) Has risen 200% since last post
The E.W. Scripps Company (Public, NYSE:SSP)

Lee went up 42% today after a 200% gain last week and a sharp 30% - 50% correction.


Damn These stocks are crazy, and the killer of it is not knowing which one to pick. I missed my SSP even though i have been following it the last few months. :rolleyes:

Idu

Downgraded from Buy to Neutral today by UBS

pocketdooz

Idu wrote: »

Downgraded from Buy to Neutral today by UBS

Current EV mult is 8.0x - higher than the other agencies currently.

Expect 1H09 results to be mixed with organic revenue way down but margins staying relatively flat.

If you believe we are at a trough wrt advertising and marketing spend then this and Aegis are stocks you want to own. If you think this downturn (in ad spend) will remain more protracted or worsen, maybe it's better to wait.

Ad spend has a very very strong correlation with non-farm payrolls which is showing signs of improvement/stabalisation in the US.

WPP remains a buy for me vs. 12 months from now but I'd be happy taking 20% profit now and waiting for this rally to run out of steam if you are a more active trader.

I rarely pay much attention to what the I Banks recommendations are to be honest. (Thanks for the update though)

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Idu

I agree with you on I-Banks ratings to be honest. Just heard it this morning thought I'd pass it along. Actually don't know anything about the company beside what's in this thread

pocketdooz

Idu wrote: »

I agree with you on I-Banks ratings to be honest. Just heard it this morning thought I'd pass it along. Actually don't know anything about the company beside what's in this thread

I see they upgraded Aegis to Buy from hold too.

UBS still has a price target of £5.00 on WPP (down from £6.50) - it's not unlikely that they know more about the upcoming results than us in the general market.

Still, this is a play on rebounding GDP

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pocketdooz

Sold now at £5.38 for c. 35% profit in < 6 weeks.

Buying back in after Wednesday's results - expect some near term weakness in numbers, a market pull-back and then I'll buy in again.

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ranger4

pocketdooz wrote: »

Sold now at £5.38 for c. 35% profit in < 6 weeks.

Buying back in after Wednesday's results - expect some near term weakness in numbers, a market pull-back and then I'll buy in again.

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Do you see market pullback occuring soon?

pocketdooz

ranger4 wrote: »

Do you see market pullback occuring soon?

I was reffering to the market for this stock. I expect some weakness in he 1H numbers on Wednesday - will likely see some profit-taking over the next few days in this name. I'd be happy to own it now for another year but feel I can get back in around £5.00 sometime later this week.

With regard the broader market, I don't know - anecdotal evidence seems to say Yes but who knows - I never try to time the overall market - it's a mug's game imo.


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daveirl

This post has been deleted.

pirelli

pocketdooz wrote: »

I was reffering to the market for this stock. I expect some weakness in he 1H numbers on Wednesday - will likely see some profit-taking over the next few days in this name. I'd be happy to own it now for another year but feel I can get back in around £5.00 sometime later this week.

With regard the broader market, I don't know - anecdotal evidence seems to say Yes but who knows - I never try to time the overall market - it's a mug's game imo.


.

I think we will have a market correction up to 15% - 20%. The shanghai index peaked around early august and then dropped steeply up to 6% on one particular day . It retraced as far back as may or June almost 22%.

Now the shangahai index also recovered before the USA market. It hit bottom in Nov/Dec 2008 and begin to recover in early 2009. So if you look at this as an indicator of where the markets will travel. Maybe in early winter we will have a strong correction.

pocketdooz

pocketdooz wrote: »

Sold now at £5.38 for c. 35% profit in < 6 weeks.

Buying back in after Wednesday's results - expect some near term weakness in numbers, a market pull-back and then I'll buy in again.

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Limit order set at £4.90

Back in now.

daveirl

This post has been deleted.

pocketdooz

daveirl wrote: »

This post has been deleted.

Had limits in at 4.50, 4.70 and 4.90 (thanks for advice btw)

Results not as bad as first glance

Has traded back up to £5.02 now

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daveirl

This post has been deleted.

pocketdooz

Now trading at 5.97.

Up c.50% in 3 months.

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daveirl

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pocketdooz

WPP now trading at £6.68 per share.

I'd be happy enough selling out of this now and locking in a 67.5% gain in 8 months.

I think most of the discounting is now priced out of this stock - currently trading at 9.0x and all results recently have been positive for the industry.

Would swap into MDCA if I were to stay invested in this space but I'm not.