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3-27-2006 MSO- Martha Stewart Living Omnimedia Inc.

CURRENT PRICE: $16.85

TYPE OF PLAY: EARNINGS GROWTH/SHORT SQUEEZE POTENTIAL

Martha Stewart Living Omnimedia, Inc. is the leading integrated content company devoted to enriching the changing lives of today's women and their families. It is a company covering a broad spectrum of business. The publishing arm includes the magazines Martha Stewart Living, Everyday Food, Martha Stewart Weddings, Body + Soul, Kids: Fun Stuff to Do Together and the recently announced magazine Blueprint, which is geared toward a younger demographic and will add fashion, beauty, health, fitness, travel, technology and culture to the core Living focus. Their television division which features the Emmy Award winning Martha Stewart Living, Everyday Food and of course Martha's version of The Apprentice, released a DVD collection through Time Warner, MSO's merchandising segment offers essential products through Home, Garden, Kitchen, Holiday, Decorating, Keeping, and Colors lines at Kmart in the United States and at Sears Canada. They have a specialty-tier brand targeting high-end consumers, which includes lines of indoor paints at Sherwin-Williams stores and several collections of bedroom, dining room, and living room furniture created in conjunction with Bernhardt Furniture Company. More recently, they entered a joint venture with KBH Homes (which recently announced very impressive earnings) to create Martha Stewart Communities. MSO also has a direct-to-consumer flower e-commerce website and regular programming on Sirius Satellite Radio. In the previous earnings report, MSO announced that total revenues vaulted 40% to $84.46 million from $60.21 million in the year-ago period. EPS was .19, handily beating the analyst's estimate of .15. A key to this earnings period was that the advertising growth of the magazine segment was up double digits, which indicates that the advertisers are coming back. Since SHLD, also recently announced strong earnings, we feel that this adds to the likelihood that Martha's sales in these stores are strong. Almost all the analysts covering the stock are bearish and thus a large short position is present. This is important because any catalyst in a case such as this typically forces a change in posture and the onset of upgrades. The balance sheet is also strong, with over 100 million in cash/equivalents.

LINKS FOR FURTHER READING:
MSO Hompage
March 15th investor conference held by Bank of America
SEC filings for MSO
General MSO statistics