Portfolio

TUNED IN

At King World, Oprah Is Queen

Most investors hunt for undervalued assets on Wall Street. But the King brothers go no further than their television sets. "Oprah is unbelievable, she's a phenomenon," says Michael King, who is ecstatic about his latest find.

King is chief executive officer of King World Productions Inc. (#35), the business that distributes Oprah Winfrey's popular daytime talk show. Winfrey's show may be responsible for as much as 15% of the company's revenues next year. "We've got a superstar," says King.

A superstar is exactly what King World needed two years ago, when it launched its effort to unseat Phil Donahue in the ratings. The company picked a tough target: Donahue had resided near the top of the charts for a dozen years. But the Kings -- Michael's brother, Roger, is chairman -- noticed that some local morning shows were beating Donahue in their own markets.

Playing tapes of potential contenders, the Kings dozed through a boring gabfest. Most of the shows consisted of what the industry calls "infotainment" -- slick programs mixing news, how-to segments, and celebrity hype. Winfrey, whose show is based in Chicago, stood out. "There's something about her that comes through the screen," says King. "She can make you laugh during serious subjects, and she can also do shows on fashion and soapopera hunks." Winfrey's show, which made its national debut last September, dominates Donahue in most markets where they compete.

Not that King World's other shows are having trouble pulling their weight. Before Winfrey, the company unearthed two other gems, "Wheel of Fortune" and "Jeopardy!" The pair of game shows are now the two highest-rated syndicated shows in television history. Thanks to them, King World's sales hit almost $146 million last year. "That one company could develop three major shows in three years defies the laws of chance," says Lee Isgur, entertainment analyst at Faine Webber. "No other company has even come close."

THE FIXER

Mark Connally: Follow the Son

Over the years, former Texas governor John Connally has profited from investments in radio stations and real estate. These days, his most profitable asset is probably his son Mark.

The former U.S. Treasury secretary is finding that it's nice to have another businessman in the family. Mark, chairman and chief executive officer of Cable Advertising Systems (#82), says that growing up the son of a famous father "had its pluses and minuses." More minuses of late, we suspect, considering his father's heavy investments in Texas's overbuilt real estate market. "We've worked together for a long time," says the elder Connally. "To that extent, we are a team."

It seems to work like this: John's investments run into serious problems, and then son Mark comes in for the rescue attempt. It started in 1974, when 22-year-old Mark volunteered to run John's 10,000-acre ranch. Mark tossed away some old family practices for the sake of the bottom line. He improved the baling of hay and raised more profitable purebred cattle. After about three years, he says, "the ranch did not generate profits, but we had reduced its losses."

Next, Mark spent about two years rising from lending officer to president of The First City National Bank of Floresville (Tex.), a rural bank that was 10% owned by -- you guessed it -- John. Mark understood the market; he was making loans to ranchers who had problems just like he had experienced. During Mark's five-year reign as president, he moved it onto the growth track: deposits rose from $18 million to $36 million and profits doubled. Looking for a bigger challenge in 1984, Mark moved to a troubled real estate investment company where you-know-who was half owner. It was beyond his help, though. "When your market goes away, there is not much you can do," he says.

At Cable Advertising Systems, the previous chairman was -- of course -- his father. When Mark became CEO in 1986, the company was out of cash and lacking direction. Now it is focusing on selling advertising time on cable-television systems. Last year, it lost about $2 million on sales of around $2 million, but Mark expects to see profits by the end of this year.

What will he do then? Perhaps it's best to ask his father. "I don't have another venture in mind for him," says John Connally, who is 70.

CURRENT EVENTS

Energetic Entrepreneurs Find New Outlets

"When people hear the phrase 'independent power producer,' it conjures up an image of some guy with a windmill on his roof," says John Kuhns, president and chief executive officer of Catalyst Energy Development Corp. (#1). But Catalyst, a $227-million concern that is the fastest-growing small public company in America, calls itself just that.

For that matter, so do Bonneville Pacific Corp. (#7) and PSE Inc. (#43). All three companies are beneficiaries of the Public Utility Regulatory Policies Act of 1978, which brought entrepreneurs into the staid utility industry. Utilities are required to buy power from the independent producers, and must pay whatever it would have cost them to produce the power themselves. "Electricity rates have risen so rapidly that it created a huge opportunity," says Kuhns. "So along we came."

MULTIPLE FRACTURES

Westworld Community Healthcare: Critical Condition

Had Michael Dunn's Doctors performed operations the way he did, few patients would have emerged alive from Westworld Community Healthcare Inc.'s hospitals. As it is, Dunn's strategy landed the company (#18) on its deathbed, with losses of approximately $100 million on sales of about $178 million last year.

Dunn began acquiring rural hospitals in 1982, upgrading them with new personnel and modern equipment. Although Westworld's 38 hospitals became more expensive on a per-day basis, Dunn explained to patients that they would spend less time laid up.

Patients, though, felt they were being pushed out the door too quickly, and they voted to take their ailments elsewhere. In response, Dunn devised another marketing strategy: he would charge patients a standard fee based on their diagnosis, not on their length of stay. Medicare used the same tough billing system; by voluntarily using the system for all patients, Dunn figured that Westworld would be seen as a leader in the drive to hold down medical costs. As the empty beds filled up, profits would follow.