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Friday, December 02, 2005

Turner Broadcasting

Something new

In 1987, I was looking for additional interesting companies in which to invest. It was time for something new, in more ways than one. I had already started investments in Sears, Kodak, and Kmart. In previous posts describing my experiences with choosing those companies, you may have noticed a trend. If a company had been around for several generations, there was little reason for me to believe they would not be around for several more. Therefore, in my novice investor's enthusiasm, company longevity became my primary criteria. (In a future post, I'll let you know how that worked out for me.)

The FOX Network

On April 6, 1987, a new primetime television network premiered. The FOX network became the fourth national network after the "Big Three" (ABC, CBS, and NBC,) of the nation's most popular TV networks, excluding PBS.

I thought about that. Wow. A fourth network. The "Big Three" had been around at least as long as I had, and now there was a fourth. There was something magical and mysterious about a company's ability to get so large as to be able to position itself with such a distinguished group as the three biggest broadcasting companies in America such as those the FOX Network was joining. That would have been like an American automobile company joining the "Big Three" carmakers of Detroit fame, Ford, Chrysler, and GM.

But that's what FOX did, and I was impressed. I said, any company who can pull off a deal like that one must have something going for it, so I am going to invest in it.

Let's buy stock

So in the Fall of '87, I walked into my local discount stock broker, fully prepared to pay an odd lot differential, with the intent of buying shares in the FOX Broadcasting Company.

"How can I help you?" asked the broker who greeted me.

"I'd like to invest in the FOX Broadcasting Company!" was my proud exclamation.

"Hmmmm," the broker began, "Do you know what Exchange that is on?"

Exchange? I asked myself.

"Exchange?" I asked the man.

"Yes. Is it on the New York Stock Exchange, the American Stock Exchange, NASDAQ?"

Nazz Dack? No, I was not going there. I've already exhibited investor ignorance in the past. I was going to try to bluff this time.

"I'm uncertain," was my casual response.

"Let me try to find it for you," he offered.

After a few minutes of digging in books and on his computer, he asked a colleague. "Hey Frank. What do you know about the FOX Broadcasting Company?"

"FOX Broadcasting?" he began, "Is that anything like Turner Broadcasting?"

"Is that anything like Turner Broadcasting?" my guy asked.

"I don't THINK so ..." I stumbled. Of COURSE it wasn't anything LIKE Turner Broadcasting. Haven't these guys HEARD of FOX Broadcasting?? Haven't they watched Married with Children, or The Simpsons? Well, maybe not.

"I'm not sure we are going to be able to help you. There is a possibility they may not yet have gone public."

To say I was disappointed was apparent. Now, after all those stock picks based on longevity, I chose one that was too new. It hasn't even been made available to relatively poor investors such as myself. I was dejected. I came in to buy stock in an exciting new company, and I feared walking out empty handed.


Then a thought occurred to me. Turner Broadcasting Company. Wasn't that that OTHER Broadcasting wonder that was taking over the TV experience in recent years? As I recalled, this really rich guy in Atlanta, Ted Turner, was churning out network after network on cable. Everywhere you turned, you saw a new Turner channel on TV. Big names. Common names, such as CNN, TNT, and TBS.

Though I walked in to buy FOX, my desire was to acquire interest in an exciting new television venture. It might have been too early to buy FOX, but apparently Turner Broadcasting was established enough to be made available to the public. After all, these guys have heard of it, and no doubt they are wealthy financial advisors. So why not. Let's buy Turner Broadcasting.

"How much is Turner going for?" I asked, too late to realize I sounded like I was asking some guy what he's looking for for an old Chrysler.

"Let me check," he started. After tapping a series of keys on his computer, he comes back with, "Turner 'A' or Turner 'B'?"

Here we go again.

"What's the difference?" I queried, resigned that my ignorance was probably old news at this brokerage.

"Turner 'A' pays dividends, and 'B' does not."

He explained, in typical brokerese, what that meant. I was still trying to absorb the whole investing experience, so I'm not sure if I recall how he explained it. I think it meant that the 'B' company reinvests what they would have paid out in dividends back into the company, or something like that.

"Turner 'B,'" I requested, wanting to put as much into investing as I could. I had no need for the small amount of dividend I would have gotten from this tiny purchase anyway.

A few more taps on the keyboard yielded a response. "Turner 'B' is presently trading for eight and three eighths," came back the professional reply.

Eight and three eighths? Dollars?? Eight dollars a share? That didn't even sound like a price for something you invest in. I was used to paying share prices in dollar amounts of 30s, 40s, and 50s. I can't even buy a pair of gym shoes, ('athletic footwear' if you're under 25) for less than thirty dollars. But I figured, OK Turner's new, so maybe that's why the price is so low.

I looked at the amount I was prepared to pay for FOX, did a quick calculation, and said, "OK, give me 25 shares of Turner 'B.'"

A few taps of the keyboard later, and I walked out the proud share holder of twenty five shares of Turner Broadcasting Company.

Little did I know that that purchase, and a later purchase of 50 more shares, would turn into the most prolific of all my investments. At one point, after several stock splits and mergers, my stake in Turner was worth over $13,000. Helped us put a down payment on a house. A real head turner.

*** Read from the Beginning *** Next Article ***

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