News Corporation (ASX: NWS) has provided shareholders with an outstanding investment return in 2012 with its shares rallying 33% compared with the 10% return from the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).
Calendar year 2012 started on a sour note for News Corp. The company, via its News of the World subsidiary, had been accused just months earlier of phone-hacking in the UK. Not only has this cost the company hundreds of millions of dollars in compensation and legal expenses but it also caused the cancellation of the proposed acquisition of UK pay-TV operator BSkyB.
In the first half of the year the bad news continued to flow, with News Corp forced to take significant write-downs of around $3 billion against its Australian publishing assets. This coincided with the announcement that it would pursue a separation of the media and entertainment business from the publishing business.
The aim for investors is to not be distracted by 'market noise' and instead focus on fundamentals, which can create opportunity for rewarding investments. News Corp is a case in point. While the negative issues were grabbing headlines, Rupert Murdoch and his team were busily continuing to grow News Corp. Acquisitions made this year include regional pay-TV provider Austar and snatching a further 25% of Foxtel from the takeover of ConsMedia.
With the first-quarter results for the financial year 2013 just released, we can see that once again the cable division has been the stand-out performer, with the division increasing operating income by $178 million. The buyback has also rolled on, with a significant volume of shares repurchased. By early November, the company had bought back nearly $6 billion worth of stock with another $4 billion of purchases still to come.
The performance of News Corp is made all the more impressive when viewed against its local competitors. APN News & Media's (ASX: APN) value has been cut in half over the year to date, while the heavily indebted Fairfax Media (ASX: FXJ) has fared little better with its share price down 47%.
The Foolish bottom line
Rupert Murdoch might be one of the oldest CEOs around, but he is also one of the most progressive and quick to adapt to the structural changes occurring in the media industry. You might say that we harp on about these things here at The Motley Fool but I can't help saying it again — buying a quality business with low debt, decent future prospects, and strong cash flows is a proven way to grow your wealth.
If you only invest in one company this year, make it our "Top Stock for 2012-13." Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in thisbrand-new FREE report.
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Motley Fool contributor Tim McArthur owns shares in News Corp. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
