If Discovery Communications’ programming were condensed into a single show, it would be about a guy who cleans up the mess after a shark in military uniform attacks Oprah Winfrey in a rainforest. The non-fiction TV producer’s line up is eclectic but lucrative: $4.2bn in revenues in the year just reported, and a $21bn enterprise value.

The investment appeal of Discovery is that it is nearly a pure play on cable networks, the most profitable and fastest growing part of the media business. Conglomerates such as Walt Disney, Time Warner, News Corp and Viacom also have capital tied up in films, publishing, theme parks and so on. And – unlike smaller network companies such as AMC and Scripps – Discovery has significant global exposure: a third of operating profits are generated abroad.

Furthermore, Discovery has been outperforming the competition (with a few exceptions, such as an investment in the floundering Oprah Winfrey Network). Fee revenue from cable and satellite distributors has been strong across the industry and Discovery has kept pace. In advertising, though, Discovery’s 14 per cent gain in 2011 (17 per cent in the fourth quarter) leads the group.

These strengths have not gone unnoticed. At 16 times this year’s earnings, Discovery trades at a premium to the conglomerates. Buying in now – after the stock has returned 200 per cent in five years – requires faith that two trends will persist. Will content producers continue to have the leverage over distributors, keeping fees growing? There are signs that distributors are pushing back. And will Discovery’s documentary-style content continue to attract advertisers? The shift towards premium TV content has helped Discovery up to now, but Dirty Jobs is not Downton Abbey. Discovery must be careful to avoid jumping the shark.

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