Is Time Warner Ready to Entertain Your Portfolio?

With shares of Time Warner (NYSE:TWX) trading around $87, is TWX an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Time Warner is a media and entertainment company. The company operates in three reporting segments: Networks, Film, and TV Entertainment and Publishing. Networks consist of television networks, premium pay, basic-tier television services, and digital media properties. Film and TV Entertainment consists of feature film, television, home video, and video game production and distribution, while Publishing consists of magazine publishing. Through its segments, Time Warner is able to move audiences around the world. With such a large and growing audience, look for Time Warner to continue to drive profits through its media and entertainment.

Chief Executive Officer Jeff Bewkes would reap more than $79 million in added payments with any change in control at Time Warner, making him a top beneficiary among shareholders who toughed out a lost decade after 2001’s ill-fated America Online merger. Joining Bewkes are investor Mario Gabelli and clients of Gamco Investors Inc., owners of a $350 million stake. In addition to benefiting from Time Warner’s return from the AOL (NYSE:AOL) mess, it has notched a 23 percent gain since a $75 billion takeover bid by Rupert Murdoch’s 21st Century Fox (NASDAQ:FOXA) became public on July 16. Bewkes, Gabelli and other employees and investors may gain further if Fox eventually wins Time Warner for more than the $85-a-share Murdoch first offered. The company has been a long-term commitment for Gabelli, who owned Warner Communications stock when Steve Ross fought Murdoch 30 years ago. “The company has been doing more or less the right things in terms of growing values, and that’s why we own 4 million shares for clients,” said Gabelli, 72, who has followed Time Warner and its predecessors for more than 40 years. Gabelli once held almost 26 million shares, according to data compiled by Bloomberg.