After writing two posts (one and two) praising CBS as a value, I was embarrassed by the fourth quarter and full year 2005 financial performance reported by the company. A $9.1 billion loss seems to put the company in the category of General Motors. The only thing more surprising than that number was the fact that the stock hardly budged when the earnings report came out. However, it is now at its lowest point since the company split from Viacom on January 1st. The short-term options I purchased on CBS are comfortably under water.

The lesson to take away from this experience is: pay attention to goodwill when considering book value. It’s not terribly surprising that the predecessors of the current CBS paid more for past acquisitions than their assets and liabilities were worth, hence recording large amounts of goodwill. What is deeply distressing is that those acquisitions have declined in value considerably over the past two years. This is a case of the sins of the father being visited upon the son.