I was suggested the stock Gray Television $GTN but I did not like it even if it looked undervalued because of its debt. The industry looked interesting and I decided to look at the competitors. Two of them, Tegna $TGNA and E.W. Scripps $SSP looked okay and I invested in Tegna.
All the stocks in the regional television industry have big debts but what made Tegna different is that they don't have to repay much of the debt in the near future as most of the maturities are long-term. Tegna can generate enough cash flow to repay the debt in time. Besides, Tegna is undergoing an acquisition by the hedge fund, Standard General, and the spread on the deal is currently about 20%. Tegna is a good arbitrage opportunity. Even if the deal fails, with all the consolidation in the industry, Tegna can be a potential target by a competitor.
While Tegna might look risky at first glance looking at the balance sheet, when we look deeper, we can see that it is priced under its intrinsic value with a margin of safety.