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A.H. Belo: Huge Upside On Paper, Huge Risk From Strategy

Jun. 03, 2020 8:07 AM ETDallasNews Corporation (DALN)20 Comments
Vince Martin profile picture
Vince Martin


  • The paper case for AHC is hugely attractive: it's easy to model $3-plus in a liquidation scenario or ~100% upside.
  • But the company is controlled by a descendant of the founder, who consistently reiterates his desire to keep the business running.
  • That desire isn't necessarily wrong - but it leads to a strategy where success appears unlikely.
  • The dividend is attractive, and there's some downside protection, but AHC is a far more difficult bet than the balance sheet would suggest.

If I could buy all of A.H. Belo (AHC) at Monday's close of $1.66 per share, I'm extremely confident I could make money - and potentially a good deal of money.

That's not because I'm a brilliant businessman or a brilliant negotiator. It's not because I have some special insight into the challenges facing the newspaper industry. Rather, it's because the value of the assets owned by A.H. Belo - including a hefty amount of cash - vastly outweighs the current market capitalization of AHC stock.

Of course, I don't own all of A.H. Belo (or any of it). Robert W. Decherd does. Obviously, Decherd doesn't own all of the company, but via a dual-class structure (and thanks to a deal with former CEO Jim Moroney, Decherd's second cousin), he controls 52.6% of the voting power. For most intents and purposes, Decherd does own A.H. Belo.

And Decherd has a different view of the company. To him, the Dallas Morning News, the core operating asset, is a family business. Decherd and Moroney descend from the Dealey family that founded the paper in 1885. Decherd joined Belo just out of college and basically rescued the DMN in the late 1970s. He spearheaded the sale of Belo's TV station business to Gannett (GCI) (which later split that business off into TEGNA (TGNA)), realizing over $60 million in the process.

Since Decherd returned to Belo in 2018, I've been skeptical that he planned to take steps to immediately realize the value AHC offers on paper. It's why I stepped away from the value case about eighteen months ago. Commentary from Decherd and Belo management last month, after the company delivered restated financials, suggests that skepticism was well-founded. And it creates a significant stumbling block to a value case that, on paper, looks particularly attractive right now.

This article was written by

Vince Martin profile picture
Overlooked Alpha launched April 2022 - subscribe at overlookedalpha.com. Some OA articles are also available here at Seeking Alpha.I've been contributing to Seeking Alpha and other investment websites since 2011, with a general (though far from rigid) focus on value over growth. I got my Series 7 and 63 back in 1999, and watched the dot-com bubble peak and then burst in real time at a small, tech-focused retail brokerage in NYC.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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