Broeb22 Posted February 10, 2021 Share Posted February 10, 2021 Well I got in averaging about $22 so I'm pretty happy with the inflated price right now. But from your argument you are saying that the downside is the stock goes nowhere. The base case is a 10.5% annual return for 5 years and the upside case is 20%. Maybe I'm overly cautious and old fashioned but that doesn't sound too bad in a zero interest rate environment. Certainly relative to everything else being priced off of multiples of inflated 2025 revenue assumptions with negative cash flow. I'm more curious though as to how you can make money much easier than that. What are you investing in? I've posted my current holdings elsewhere on this board. I've had success with more GARP-like stocks, like everyone else in the last 10 years. In general, I've found enough companies to make a portfolio out of that trade for less than 25x this year's earnings and are growing at 15-20% per year. You can earn decent returns at those entry points. My current problem is that many of these stocks have been bid up to levels that don't really make sense, but I carry about 30% cash so I don't really want to sit on even more cash. It's tough to find things that have a definite future (unlike DISCA) that trade for reasonable prices. It's not for lack of trying. I've tried ETM after its RMT with CBS Radio. I've owned SEAS at $20 and watched it go to $12, PBH at a 13% FCF yield and seen it go nowhere, I watched HBI for a while and its gone a lot of places but not up over about 5 years time, I actually made money buying UA at $11 in late 2017 and selling it around $20 but long-term the recovery never materialized in the time frame I thought, I've owned ARCO for over 5 years and despite trading at massive discounts to DM franchisors, it continues to be stupid cheap but is actually down from my purchase price. Heck I even thought ADS was interesting at $200 per share and like 10x earnings, and look how that turned out. Not too mention I owned DISCK for a couple years. So trust me when I say I've been down the road you're so excited about for a while. Congrats on your $22 purchase price. You did well buying there. I'd be surprised in IRR's are very interesting from here. Link to comment Share on other sites More sharing options...
bizaro86 Posted February 11, 2021 Share Posted February 11, 2021 I'm only familiar with SEAS of the ones you mention, but its over $33 at present. So if you bought at $20 any time in the last few years the return is acceptable, imo. Link to comment Share on other sites More sharing options...
Broeb22 Posted February 11, 2021 Share Posted February 11, 2021 I'm only familiar with SEAS of the ones you mention, but its over $33 at present. So if you bought at $20 any time in the last few years the return is acceptable, imo. 2015...so not great. Link to comment Share on other sites More sharing options...
hasilp89 Posted February 11, 2021 Share Posted February 11, 2021 glad this started getting some back and forth like some others here i was sub $20 cost and i didn't see much downside from that price. Honestly when John Malone was on CNBC saying it was a freaking bargain at $15, i didn't sit around and think i was smarter than him. re Broeb22's pointed question on needing to predict the number of Disc+ subs in 5 years - i've never felt i had to and that's why i like this. why don't i need to? well yes i bought at a good price but 1) i've never thought the cable business was going to zero over night or even in 3-5 years, 2) The international market is still large and selling the scripps content over there has/is worked/working, 3) The content still resonates with people - this is coming from someone who never watches the garbage but knows that people binge 90 day fiancé just as much as crown while it costs 1/10th to produce. you can gloss over Zaslav's sales pitches on DISCK having content that resonates but i really think they do. You wanna watch Anthony Bourdain (RIP) in his prime? No reservations ain't on netflix. when i do think of Discovery+ ability to be successful I ask 1) will it be that hard to execute well given they have good content, -Maybe getting the streaming asset right isn't that hard when you have good content (i correlate this to how late, michaels, bed bath, dicks and best buy were ever so late to online and BOIPS - they were slow, everyone thought amazon would crush them no one would ever shop there again, but they had a niche they served and once they figured out the tech they survived). I see similarities - the content backlog is huge and they've gone ahead an executed on the tech. the app is great., people know it and like it - NFLX needs more subs to keep producing great content, DISCK doesn't. 2) are they too late did they need to be a first mover I even question the need to be a first mover, how late was Disney (NFLX, HULU, PRIME were '07 and earlier, Disney was 12 years later....) - they had the content and they got the platform/tech right. DISCK has the content and the app is solid. I guess we can argue all day, but we'll get an idea on the next earnings call where the sub trajectory is going, how much cable subs are declining. But at a $20 cost i'm not loosing sleep over it. Buying was a pretty easy decision, holding through 2020 was an fairly easy decision and hopefully when i need the cash selling it will be too. Link to comment Share on other sites More sharing options...
dwy000 Posted February 11, 2021 Share Posted February 11, 2021 glad this started getting some back and forth like some others here i was sub $20 cost and i didn't see much downside from that price. Honestly when John Malone was on CNBC saying it was a freaking bargain at $15, i didn't sit around and think i was smarter than him. re Broeb22's pointed question on needing to predict the number of Disc+ subs in 5 years - i've never felt i had to and that's why i like this. why don't i need to? well yes i bought at a good price but 1) i've never thought the cable business was going to zero over night or even in 3-5 years, 2) The international market is still large and selling the scripps content over there has/is worked/working, 3) The content still resonates with people - this is coming from someone who never watches the garbage but knows that people binge 90 day fiancé just as much as crown while it costs 1/10th to produce. you can gloss over Zaslav's sales pitches on DISCK having content that resonates but i really think they do. You wanna watch Anthony Bourdain (RIP) in his prime? No reservations ain't on netflix. when i do think of Discovery+ ability to be successful I ask 1) will it be that hard to execute well given they have good content, -Maybe getting the streaming asset right isn't that hard when you have good content (i correlate this to how late, michaels, bed bath, dicks and best buy were ever so late to online and BOIPS - they were slow, everyone thought amazon would crush them no one would ever shop there again, but they had a niche they served and once they figured out the tech they survived). I see similarities - the content backlog is huge and they've gone ahead an executed on the tech. the app is great., people know it and like it - NFLX needs more subs to keep producing great content, DISCK doesn't. 2) are they too late did they need to be a first mover I even question the need to be a first mover, how late was Disney (NFLX, HULU, PRIME were '07 and earlier, Disney was 12 years later....) - they had the content and they got the platform/tech right. DISCK has the content and the app is solid. I guess we can argue all day, but we'll get an idea on the next earnings call where the sub trajectory is going, how much cable subs are declining. But at a $20 cost i'm not loosing sleep over it. Buying was a pretty easy decision, holding through 2020 was an fairly easy decision and hopefully when i need the cash selling it will be too. While the point about not having to be first to be successful is valid, I'm not sure comparing it to Michaels and Bed, Bath & Beyond is helping the argument. Link to comment Share on other sites More sharing options...
hasilp89 Posted February 11, 2021 Share Posted February 11, 2021 Fair point I could have probably left that out. My belief is there is an overemphasis of legacy business destruction from big tech which DISCK gets lumped into, and I don’t believe it will necessarily play out that way. Link to comment Share on other sites More sharing options...
Broeb22 Posted February 11, 2021 Share Posted February 11, 2021 I do think Roku makes the likelihood of something like D+ having a place in the world. I'm reminded of the quote Malone (or somebody) had about the content world where the content gets bundled and unbundled then rebundled. Roku is turning into that rebundling concept which puts them in an interesting spot. But the bundler has an incentive to add options to their bundle to justify their own existence. If people could get everything they wanted from one or two streaming channels, then why does the bundler need to exist? So there is a real argument for Roku and other aggregators giving these 2nd or 3rd tier streaming platforms a place in the world. What do the economics of that arrangement look like for a D+? I don't know, maybe they're not bad. Are they as good as cable was? Link to comment Share on other sites More sharing options...
thefatbaboon Posted February 11, 2021 Share Posted February 11, 2021 Personally I have been very happy with the app numbers so far. Much much better than i was expecting. To be the top entertainment app after 5 weeks from launch on Google play and the top entertainment app on Amazon, above Netflix, above Disney, above Tubi and HBO! And to still be top ten on iOS. Lets see how month two goes but it looks very promising so far! Link to comment Share on other sites More sharing options...
adhital Posted February 12, 2021 Share Posted February 12, 2021 Not excited by the reviews here https://www.amazon.com/Discovery-Plus-Learning-Digital-Premieres/dp/B087G5BN7Z Insider sale is not encouraging either https://www.secform4.com/insider-trading/1437107.htm But I’m hoping they do well.. bought around low 20s and recently sold all my position Link to comment Share on other sites More sharing options...
dwy000 Posted February 12, 2021 Share Posted February 12, 2021 Not excited by the reviews here https://www.amazon.com/Discovery-Plus-Learning-Digital-Premieres/dp/B087G5BN7Z Insider sale is not encouraging either https://www.secform4.com/insider-trading/1437107.htm But I’m hoping they do well.. bought around low 20s and recently sold all my position The insider sales were a couple of months ago, long before the launch so I doubt it had anything to do with that. Also, Malone sold 5 different company shares in 10 different transactions within the same 10 days in December. Almost certainly tax and estate planning. Link to comment Share on other sites More sharing options...
thefatbaboon Posted February 12, 2021 Share Posted February 12, 2021 Not sure what review you are linking to either adhital, seems to be an old indian version. Here is the actual app page on amazon, its nearly equal in 5* rating (78%) to Netflix (82%) and Disney (81%). And higher rated than every other video entertainment app on Amazon. https://www.amazon.com/Discovery-Communications-discovery-Stream-Shows/dp/B08F8XQLQZ/ref=pd_rhf_se_p_img_3?_encoding=UTF8&psc=1&refRID=Q2NGK34QP91EJZ5F1BE3 Link to comment Share on other sites More sharing options...
hasilp89 Posted February 12, 2021 Share Posted February 12, 2021 to the point on reviews - i've been scanning twitter and other sources. i think the main gripe i'm seeing is people upset that they used to have these shows on cable and now they have to pay for a separate service. That's growing/industry pains to me. The folks who still haven't cut the cord yet that are finally having to get there. Otherwise the app works very well, good UI etc. Link to comment Share on other sites More sharing options...
adhital Posted February 12, 2021 Share Posted February 12, 2021 Not sure what review you are linking to either adhital, seems to be an old indian version. Here is the actual app page on amazon, its nearly equal in 5* rating (78%) to Netflix (82%) and Disney (81%). And higher rated than every other video entertainment app on Amazon. https://www.amazon.com/Discovery-Communications-discovery-Stream-Shows/dp/B08F8XQLQZ/ref=pd_rhf_se_p_img_3?_encoding=UTF8&psc=1&refRID=Q2NGK34QP91EJZ5F1BE3 I was reading the most liked actual reviews/feedback, seem to be from the real audience, and didn't pay attention to the app version.. my apologies. Reviews and Inside sale is not the reason for investing; however, IRR and free cash flow yield at this price don't seem that compelling to me as it was in the low 20s. That doesn't mean DISCA can't be a multi-bagger given it's return on equity vs, cost of capital and capital structure in general. Link to comment Share on other sites More sharing options...
hasilp89 Posted February 22, 2021 Share Posted February 22, 2021 didn't get a chance to listen in but saw headline number of 11m+ subs (12m by month end). 40M shares bought back in low 20s. realized investment in FUBO TV. OIBIDA down 10% and FCF down 25%. Link to comment Share on other sites More sharing options...
Grossbaum Posted March 1, 2021 Share Posted March 1, 2021 Does anyone have any insight into the large difference in Discovery’s A shares and K shares? Currently, there is about a $10/share difference – while the 6 year average is about a $2/share difference. Who is buying the A shares instead of the K shares at the current valuations? And what are the motivations or investment mandates that are driving that decision? My understanding is that there is no economic difference between the share classes. The only difference is the A shares have 1 vote per share while the K shares have no votes per share. Nonetheless, voting control is maintained by the super voting B shares and convertible preferred stock. John Malone and Advanced/Newhouse combine for 43% of voting power. Therefore the A shares 1 vote per share is of limited value. The A shares seem to be somewhat more liquid with a 15 day average daily volume of 7.9m shares vs 5.1m shares for the K shares. This doesn’t seem do be a large enough difference in liquidity to drive such a wide difference in valuation. The K shares seem plenty liquid. The passive index funds (SPY/IVV) own both series of shares, related to the market cap of each series. The spread widened dramatically during the same time as Wall Street Bets related stocks rallied, specifically on Jan 27th. So, perhaps it is just retail buying. Maybe arbs that normally would correct the mispricing are a bit tentative because of Wall Street Bets stock rallies? This is just speculation. The Company has been directing it’s repurchase program exclusively to the K shares recently. Discovery Inc – Total Shares Outstanding (at Feb 8, 2021) Series A (DISCA) 163m Series B (DISCB) 6.5m Series C (DISCK) 318m Pref Stock Conv. 165m Total 652m Link to comment Share on other sites More sharing options...
mwtorock Posted March 1, 2021 Share Posted March 1, 2021 WSB stock rally was about heavily shorted stocks, of which DISCA is one (about 30% of float shorted last time I checked). Why so much shorted? Maybe just a simple pair trade of long DISCK and short DISCA to explore the value gap? The rally might be driven by short covering or speculation of short squeeze. Link to comment Share on other sites More sharing options...
peridotcapital Posted March 1, 2021 Share Posted March 1, 2021 WSB stock rally was about heavily shorted stocks, of which DISCA is one (about 30% of float shorted last time I checked). Why so much shorted? Maybe just a simple pair trade of long DISCK and short DISCA to explore the value gap? The rally might be driven by short covering or speculation of short squeeze. In addition, retail traders and algo's that are trading along with them probably don't spend much time looking at the different classes and picking and choosing, so the A's might be artificially inflated. I recently opened a pair trade, as a gap of this size seems unlikely to hold up longer term. Link to comment Share on other sites More sharing options...
Nelg Posted March 3, 2021 Share Posted March 3, 2021 Did you just do a simple long K/short A trade, or did you execute it some other way? The price discrepancy seems kind of ridiculous to me, but the MTM losses may become very large if you get weird trading activity again. Link to comment Share on other sites More sharing options...
peridotcapital Posted March 3, 2021 Share Posted March 3, 2021 Did you just do a simple long K/short A trade, or did you execute it some other way? The price discrepancy seems kind of ridiculous to me, but the MTM losses may become very large if you get weird trading activity again. Yup, just a simple long/short. Link to comment Share on other sites More sharing options...
dwy000 Posted March 5, 2021 Share Posted March 5, 2021 With a heavy heart I finally sold out of my Disck position. Love the company and the streaming success but the stock price seems to be getting ahead of itself. Its doubled in a couple of months. I think the upside from here is somewhat limited vs retracement on downside for a while. Happily for all longs, my selling means it will probably double again from here. Link to comment Share on other sites More sharing options...
peridotcapital Posted March 5, 2021 Share Posted March 5, 2021 With a heavy heart I finally sold out of my Disck position. Love the company and the streaming success but the stock price seems to be getting ahead of itself. Its doubled in a couple of months. I think the upside from here is somewhat limited vs retracement on downside for a while. Happily for all longs, my selling means it will probably double again from here. Well said. I've been trimming it back in recent days too. The A shares are approaching my fair value target, so the C shares are now just an averaged sized position, given the huge price gap for the voting stock. Crazy times we are witnessing, always thought the value gap would close, but not in 2 months for an old media company that was left for dead. Congrats longs! Link to comment Share on other sites More sharing options...
dwy000 Posted March 26, 2021 Share Posted March 26, 2021 Well that was swift and sudden. Stock down below $40 after getting crushed the past 2 days. If this keeps up I might have to get back in. No real news other than a UBS downgrade 2 days ago on valuation. Somebody REALLY wants out. Link to comment Share on other sites More sharing options...
wabuffo Posted March 26, 2021 Share Posted March 26, 2021 DISCK trades in alignment with ViacomCBS and AMC Networks. ViacomCBS started the avalanche with an announced secondary that sliced 25% off that stock. The whole group took off due to short positions being reduced/bought in due to the GME bloodbath (they are all heavily shorted stocks) and some optimism that streaming might be a viable pathway for their business models. The air needed to come out. I sold half my position at $65 (DISCK) because I just thought Malone et al would take advantage of the crazy price and issue stock to take out debt. wabuffo Link to comment Share on other sites More sharing options...
vince Posted March 26, 2021 Share Posted March 26, 2021 Well that was swift and sudden. Stock down below $40 after getting crushed the past 2 days. If this keeps up I might have to get back in. No real news other than a UBS downgrade 2 days ago on valuation. Somebody REALLY wants out. I sold 80% of my shares and call options, some about 20% from the top and some very close to the top. Interestingly, it wasn't overvalued on a fcf basis at the top and is now back in value territory so I have started buying again at 36. Viacom looked overvalued at the top so these 2 stocks are not comparable imo, and looks like disca is better positioned long term. Link to comment Share on other sites More sharing options...
wabuffo Posted March 26, 2021 Share Posted March 26, 2021 I agree Vince - I much prefer DISCK to VIAC or AMCX. wabuffo Link to comment Share on other sites More sharing options...
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