On two occasions in the past year, I've recommended Liberty Capital (Nasdaq:LCAPA) and Liberty Global (Nasdaq:LBTYA) - both companies are run by John Malone. Well, now I'm going to recommend Liberty Interactive (Nasdaq:LINTA). Its stock is up 69% in the past 52 weeks compared to 26% for the S&P 500, so it might be ready to take a break. Nonetheless, the tracking stock has some good assets under its roof. Here's hoping a third time's a charm.
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The Nook
Liberty Capital made a $1 billion bid for 70% of Barnes & Noble (NYSE:BKS), the world's largest bookseller, on May 19, and it did so for two reasons. First, John Malone is a value investor and sees an opportunity to buy at the bottom. With Borders, its largest competitor, in bankruptcy protection, the book business is in dire straights. You couldn't ask for a better contrarian investment. Secondly, and more importantly, Barnes & Noble's Nook has 28% market share amongst electronic readers. Although the equity investment will attribute to Liberty Capital, and not Interactive, its QVC shopping channel would most certainly play a big part in growing Nook's business. There is no reason why this can't be the model for future acquisitions where Liberty buys dying brands and resuscitates them using its media might, similar to what Iconix Brands (Nasdaq:ICON) does. (For more, see Investing Like A Contrarian.)

QVC
A Barron's article in March about Liberty Interactive correctly observes that an investment in the interactive business is really a bet on QVC, which generated a lion's share of the revenues and profits in 2010. There's no disputing this fact. However, part of the interactive group includes equity investments in four public companies that were spun-off from IAC/Interactive (Nasdaq:IACI) in August 2008, including 32% of HSN (Nasdaq:HSNI), 25% of Tree.com (Nasdaq:TREE), Interval Leisure Group (Nasdaq:IILG) and 25% of Expedia (Nasdaq:EXPE). Of the four, HSN and Expedia provide the most compelling stories, although for different reasons. QVC's market share in TV home shopping is 69% compared to 29% for its minority-owned rival. At some point, QVC will buy HSN and together they will rule home shopping. As for Expedia, I wrote a very favorable article in March about the online travel company. At the time, I thought its stock was oversold by a substantial amount and slightly more than three months later, it appears investors agree. Since March 16, its stock is up 40.8% compared to 7.7% for the S&P 500. They might be minority investments but they continue to pay dividends.

Valuation
On the surface, Liberty Interactive appears to trade at fair value. However, two investment industry heavyweights see things in a different light. Bill Nygren, co-manager of the Oakmark Fund, which owns 5.2 million shares, believes the real net asset value per share is $26. Nygren adds in $4.50 in value from its public company investments referred to above and the goodwill from its majority purchase of QVC from Comcast (Nasdaq:CMCSA) back in 2003, which reduces earnings per share by 60 cents annually. Weitz Funds owns 7 million shares in various funds including the Value Fund, where it's the second largest holding. Weitz believes it will grow earnings at a double-digit pace in the intermediate term and, if Liberty Media is successful in its attempt to split-off the interactive assets into its own company, it will then be able to buyback shares. The matter is currently before the Delaware courts. I don't personally see this as a selling feature, but money managers seem to love share repurchases. Either way,

Bottom Line
Liberty Media's assets are a very interesting conglomeration. Investors in the interactive group will likely do well in the long-term.

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