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Investing: What's Time Warner's outlook?

Also: Eaton Vance Income fund is not for the faint of heart.

April 17, 2011|By Andrew Leckey

Question: Can I expect my shares of Time Warner Inc. to continue to gain in value?

Answer: Long-term success for this media and entertainment company is likely to depend on original thinking in adapting to a changing media landscape.

Time Warner owns cable TV channels HBO, CNN, TNT and TBS; movie studio Warner Bros.; and such magazines as People, Time and Sports Illustrated. It generates nearly one-third of its sales outside the U.S.

The company's bottom line is likely to get a boost this year from film sequels "Harry Potter and the Deathly Hallows: Part 2," "The Hangover: Part II" and "Happy Feet 2."

On the smaller screen, TBS has a late-night hit on its hands with "Conan," but HBO has yet to equal past blockbusters "The Sopranos" and "Sex and the City."

Further into the future, the firm's TV Everywhere online streaming concept, launched with Comcast Corp., could boost revenue for Time Warner's pay TV channels by allowing cable subscribers to watch content on multiple devices.

The company earned $2.6 billion last year, up 4.1% from 2009, while its sales rose 5.9% to $26.9 billion. In the fourth quarter, sales were up 8.3% from a year earlier.

Shares of Time Warner are up 12% this year after gaining 10% in 2010.

Despite that good news, the company has had some difficulties in the executive suite.

Jack Griffin, chief executive of the firm's Time Inc. publishing unit, was fired in February after six months on the job. His boss, Time Warner CEO Jeff Bewkes, said at the time that Griffin's leadership style "did not mesh" with the company. Randall Rothenberg, a Griffin hire who was Time's chief digital officer, stepped down shortly thereafter.

Ratings on Time Warner stock by Wall Street analysts consist of six "strong buy" grades, 12 "buys" and 10 "holds," according to Thomson Reuters.

Eaton Vance Income fund is not for the faint of heart

Question: Eaton Vance Income was recommended to me by an advisor. What do you think of this mutual fund to round out my portfolio?

Answer: If you're looking for an easygoing, run-of-the-mill bond fund that never makes you nervous, this isn't it.

Willing to accept greater credit risk than other funds that invest in high-yield debt, also known as junk bonds, Eaton Vance Income is primarily for an investor willing to accept volatility in exchange for higher returns.

The $2.9-billion fund's "A" shares have posted a 14% total return in the last year and a three-year annualized return of 10%, both ranking above average for high-yield bond funds.

The portfolio lost 30% in 2008, the year of the financial crisis, but erased that loss and then some the following year.

The fund's managers prefer bonds from issuers with predictable cash flows. That means fewer companies in cyclical industries such as steel and paper, and more telecommunications and cable firms.

The average credit rating of the bonds held by the fund is B. Their average duration, a measure of the sensitivity to changes in interest rates, is about three years. About 7% of the portfolio is in cash.

The fund imposes a 4.75% sales charge, or "load," on purchases of its shares and requires a $1,000 minimum initial investment. It last reported annual management expenses amounting to 1.04% of fund assets.

Andrew Leckey answers questions only through the column. Write to him at yourmoney@tribune.com.

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