Investors at Odds Over Lamar Advertising's Future

Lamar Advertising is likely in for a year of depressed revenues simply because companies are cutting back on advertising, and therefore the billboards that the company provides, in the recession. What this means for Lamar’s future, however, is an open question judging by recent maneuverings in its stock.

Charlie Bottle, writing on Seeking Alpha, is shorting the stock for eight reasons. He cites the recession, the company’s debt load, and the fact that according to certain finance metrics the stock still appears too expensive even though it is down 80 percent from its peak. But it is Bottle’s eighth reason that caught BNET’s attention:

Sean Reilly, the chief operating officer of Lamar and a member of the company’s controlling family, sold all of his class A shares in the company on November 10 for $3.6 million at an average per-share price of $14.07. Reilly still controls more than 10% of the outstanding stock in the company. Through a partnership, he and his siblings own nine million class B common shares, (which don’t trade publicly and have 10 times the voting power of a class A share). Reilly owns more than one million class B shares on his own, though he converted 200,000 of them into class A shares before his most recent sale.

This turns out to be true. You can see the sale of Reilly’s shares here. But if you dig a bit further through Lamar’s SEC filings you’ll find that while Reilly was doing that, two other Lamar directors were actually buying shares. So either there are some internal differences over where this company is going or Reilly just needed the money.

More interesting still, a month after the Reilly sale, Ron Baron’s Baron Capital Group bought more than 10 percent of Lamar’s class A common stock, according to this 13G filing.

The Baron Group declined comment on why it did so. But the group’s philosophy web page gives a clue: Baron likes to buy and hold for the long term:

We seek companies that have a unique product or service with a high barrier to entry to competitors. Conversely, we avoid companies where we believe new technology or competition could undermine their advantage in the marketplace.

Also passing opinions on Lamar recently were Piper Jaffray:

We are initiating coverage of LAMR with a Neutral as soft fundamentals, lack of visibility and high financial leverage outweigh an attractive business model, reasonable valuation and a strong management team. However, we are bullish on the long term prospects for the outdoor advertising business in general and Lamar in particular.

And Wedbush Morgan:

A pure play on good long-term growth trends in the U.S. outdoor advertising industry. Would revisit stock in anticipation of turn in key regions or categories like auto, retail or real estate.

So there you have it: The experts think you should sell, buy or remain neutral on Lamar right now.

• BNET’s previous coverage of Lamar Advertising:
• Lamar Advertising Still Embroiled in Pittsburgh Ethics Scandal
• Lamar Advertising: The Canary in the Coal Mine