Media Gigante
How do you outmaneuver a lackluster economy? Ride the top company in a fast-growing field. Our pick: Univision, the nation's Spanish-language media titan
By Nick Pachetti

(MONEY Magazine) – Here's an investment strategy to help counter the slowing economy: Identify a fast-growing industry and single out the one player that dominates that flourishing market. Adding shares of such a company to your portfolio should make it less susceptible to the vagaries of the business cycle.

For instance, some 37 million Spanish speakers account for 13% of the nation's population and spend roughly $520 billion a year. Their numbers are expected to grow about 15% by 2013. By then, the amount they'll spend on cars, refrigerators, stereos and even soda could exceed $1 trillion.

Any company that wants to successfully peddle its wares to this group is going to have to reach them through Univision (UVN). The Los Angeles company's media outlets address 98% of the country's Spanish-speaking population, a scope of influence no other company can match. Its flagship Univision Network is the most watched Spanish-language broadcast network in the country. Univision's properties are the tops in cable (Galavision), radio (Univision Radio) and on the Internet (Univision Online). Indeed, of the $2.6 billion spent on Spanish-language advertising in the U.S. last year, 50% went to Univision.

Univision got to the top of the heap thanks to prescient moves. Most notably, it signed exclusive programming contracts with the world's two largest Spanish-language television producers, Mexico's Televisa and Venezuela's Venevision. Those deals run through 2017, guaranteeing Univision first dibs on the most popular Spanish-language shows for years to come. "It's as if ABC had control over every show produced by Fox, Buena Vista, Paramount and Warner," says Harris Nesbitt analyst Leland Westerfield. "No other company, and certainly no media one, has that kind of strategic advantage."

Of course, there's always the chance that in a nation with hundreds of TV channels, Hispanics, like many other Americans whose first language is not English, will increasingly forsake their native tongue. Yet even as they've assimilated into U.S. society, Hispanics are actually watching more Spanish-language television than ever before. Ten years ago, this group split their television time 60-40, watching more English television than Spanish, according to Nielsen Media Research. Today those numbers are nearly reversed, and Univision commands an 80% share of the audience.

All that makes Univision's stock sound like a screaming buy—but there has to be a catch, right? Actually, there are two. First, a growing and profitable market niche will not go uncrowded for long. Univision's commanding position is starting to come under attack by chief rival Telemundo, which was purchased by GE's NBC unit in 2002. Telemundo has already chipped away at Univision's formidable lead, and the second-place player's key audience numbers got an extra boost from televising the Athens Olympics, the broadcast rights to which belong to parent company NBC.

The second catch is price. "With Univision, it's all about valuation," notes Merrill Lynch media analyst Jessica Reif Cohen. In other words, to acquire Univision's stock you're going to pay dearly. Someone buying at the current price of $33 a share is shelling out 60% more for $1 of Univision's profits than for the earnings of the average media company.

Henry Ellenbogen, an analyst at T. Rowe Price, argues that paying a premium for Univision is worth it because of how fast those earnings will grow. Indeed, profits are expected to grow at an annual pace that's two to three times faster than anything Viacom and Disney can muster. (Wall Street values media companies on earnings before interest payments, taxes and depreciation and amortization charges, a figure known as EBITDA.) And Univision carries less debt than its peers.

Investors have dumped Univision's stock this year—it's off almost 20% from its peak—over issues that appear to be short-lived, such as the loss of a popular radio show host and Telemundo's recent ratings gains. While Univision's shares traditionally go for way more than other media company offerings, today the difference is at one of its narrowest points. As Ellenbogen says, "This is a great long-term story."