16.4

Hearst-Argyle Television has seen aggressive insider purchases in the last month. The Hearst Family Trust bought more than 400,000 shares of the company in December between $21.31 and $22.37 a share.

Early last month, privately held newspaper publisher Hearst Corp. said it plans to purchase up to eight million Series A common shares of Hearst-Argyle Television. This purchase would boost Hearst's stake in HTV to about 82%.

Hearst had, in August, made a tender offer of $23.50 for the HTV shares that it did not already own. The tender offer failed, however, and expired on Oct. 12.

HTV's revenue dropped 3.4% year over year, or by $6.2 million, in the third quarter to $176.8 million. The downturn was primarily due to three reasons. First, the U.S. political cycle had more elections and, therefore, more advertisement expenditures in even-numbered years, like 2006.

Second, ad revenues were higher in 2006 due to the winter Olympics. Third, the housing crisis and the consequent decline in consumer confidence led to a fall in advertisement volumes. Hearst-Argyle's net income declined by $6.8 million, or 41.2%, to $9.7 million in the quarter ended Sept. 30.

In November, Barrington Research upgraded the firm from underperform to market perform, with a target price of $25.

The U.S. presidential election is sure to contribute to HTV's revenue this year. Research firm PQ Media forecasts a 64% rise in political media expenditures in the 2008 elections to $4.5 billion, as compared to $2.7 billion in the 2004 presidential elections. Bear Stearns said recently that large station owners with network TV affiliates, such as HTV, will be the biggest beneficiaries of the political ad outlay. HTV's revenue will also get a boost from the Beijing Olympics this year.

The company's shares have been on a general downturn since early October. With the potential revenue boost from the elections and the Olympics later this year, I believe there is upside from the current levels. But I believe you can wait to buy this issue for 30 to 60 days because I don't see much in terms of short-term catalysts.

Big money to be spent in political season coming up.

Upgraded by Deutsche Securities from Hold to Buy

Upgraded by Matrix Research from Sell to Hold

Downgraded by Matrix Research from Hold to Sell