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LMCA - Liberty Media

ItsAValueTrap

By ItsAValueTrap
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ItsAValueTrap Newbie

ItsAValueTrap

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Hmm I missed their Vivendi judgement that may or may not be successfully appealed.

 

In 2012, we won our case against Vivendi and obtained a judgment in the amount of €765 million.

As expected, Vivendi is appealing this verdict, but we remain confident in the final outcome.

 

Roughly $990M if Liberty wins.  (It could be more if the court awards them more money in the appeal.)

 

In connection with a commercial transaction that closed during 2002 among Liberty, Vivendi Universal S.A. (“Vivendi”) and the former USA Holdings, Inc., Liberty brought suit against Vivendi and Universal Studios, Inc. in the United States District Court for the Southern District of New York, alleging, among other things, breach of contract and fraud by Vivendi. On June 25, 2012, a jury awarded Liberty damages in the amount of €765 million, plus prejudgment interest, in connection with a finding of breach of contract and fraud by the defendants. On January 17, 2013, the court entered judgment in favor of Liberty in the amount of approximately €945 million, including prejudgment interest. Vivendi has filed notice of its appeal of the judgment to the United States Court of Appeals for the Second Circuit, and, in that court, Liberty intends to seek a higher rate of pre-judgment interest than what the district court awarded. The case is stayed pending the appeal and the appeal in this case has been consolidated with the expected appeal of a class action brought against Vivendi by other shareholders. The amount that Liberty may ultimately recover in connection with the final resolution of the action, if any, and the timing of the resolution of the action is uncertain. Any recovery by Liberty will not be reflected in our consolidated financial statements until such time as the final disposition of this matter has been reached.
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giofranchi Newbie

giofranchi

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Parsad,

on November 26, 2012, I started the “Liberty Media” thread under the section “General Discussion”. Then, on March 14, 2013, ItsAValueTrap started the “LMCA – Liberty Media” thread under the section “Investment Ideas”, which is where it actually belongs.

 

I was wondering: is there a way to put the two threads together? And to create just one thread “LMCA – Liberty Media” under the section “Investment Ideas”?

 

Thank you very much! :)

 

giofranchi

 

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giofranchi Newbie

giofranchi

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Gio,

 

The LMCA / STRZA are not new.  It just get's reported that way due to the spin-off, since they are both theoretically "new" securities due to the restructuring.  BRK already owned both of them.

 

Hi David!

I don’t follow BRK’s investments so closely (I completely “delegate to the point of abdication” to the Warren-Todd-&-Ted trio  ;D ;D ;D), and I must admit I wasn’t aware LMCA already was among them…

I just posted the piece of news I received by Seeking Alpha.

Thank you for the clarification! :)

Gio

 

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dcollon Newbie

dcollon

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I totally understand.  I actually love the fact that I now get to follow Ted and Todd closely.  I'm sure there will be some interesting discussion of NOV because of that filing. 

 

Ted owned Liberty back at his old fund and bought a decent amount when he moved over to Berkshire.  He bought it in the single digits, at his old fund, if my memory is correct. 

 

Enjoy the rest of your day/evening.

 

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Sportgamma Newbie

Sportgamma

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I hate these kind of articles from Seeking Alpha. The only aim of the author is to name-drop stocks with a big following in order to generate clicks (and as a result a higher payment from SA). I honestly do not understand why the editors ever allow these kind of articles to go online.

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giofranchi Newbie

giofranchi

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I hate these kind of articles from Seeking Alpha. The only aim of the author is to name-drop stocks with a big following in order to generate clicks (and as a result a higher payment from SA). I honestly do not understand why the editors ever allow these kind of articles to go online.

 

Hi Sportgamma,

I thought the fact two behemoths like Apple and Google are both interested in Sirius XM is a piece of news worth mentioning. I also find intriguing the hint that Google might buy Sirius XM out: it would be the perfect end to one of the greatest trade of the century so far! 8)

So, I can basically think of two reasons why you “hated” the article:

1) its news were obvious to you (I follow neither Apple nor Google so closely, so I cannot judge),

2) its news were just “rumors” to you, and therefore probably false (in this case, I guess we have to wait and see what will actually happen in the months ahead).

As far as the author’s motives for penning that article are concerned, I have really no clue, and I really don’t care. :)

 

giofranchi

 

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Sportgamma Newbie

Sportgamma

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I hate these kind of articles from Seeking Alpha. The only aim of the author is to name-drop stocks with a big following in order to generate clicks (and as a result a higher payment from SA). I honestly do not understand why the editors ever allow these kind of articles to go online.

 

Hi Sportgamma,

I thought the fact two behemoths like Apple and Google are both interested in Sirius XM is a piece of news worth mentioning. I also find intriguing the hint that Google might buy Sirius XM out: it would be the perfect end to one of the greatest trade of the century so far! 8)

So, I can basically think of two reasons why you “hated” the article:

1) its news were obvious to you (I follow neither Apple nor Google so closely, so I cannot judge),

2) its news were just “rumors” to you, and therefore probably false (in this case, I guess we have to wait and see what will actually happen in the months ahead).

As far as the author’s motives for penning that article are concerned, I have really no clue, and I really don’t care. :)

 

giofranchi

 

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constructive Newbie

constructive

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The Brooklyn Investor on Charter Communications (CHTR).

 

giofranchi

 

So CHTR is a turnaround, the investment mainly depends on new management improving operations. It will take a lot of work and time to turn around a persistently inefficient organization.

 

But there are well-run cable companies available. TWC trades at 1.3x sales, compared to CHTR trading at 1.5x sales. Where is the upside, even if Rutledge runs the company as efficiently as TWC?

 

Malone also wants to increase leverage, but there's no margin of safety when increasing debt/EBITDA from 3.5x to 5x. It's just asking for trouble, especially when the business model is under attack from cord-cutting, VOD, unbundling, FTTH, satellite, etc.

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Packer16 Newbie

Packer16

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Sounds interesting but the price is high @ 9.3x EBITDA versus other cable cos Quebecor @5.8x EBITDA, Cogeco @ 6.2x EBITDA and General Communications @ 5.2x EBITDA.  His high speed connectivity thesis makes sense.  This may lead to the revival of some the old Telcos if they can stem the line declines with HSI sales.  This is already occurring with Hawaiian Telecom, Alaska Comm and LICT.  At some point it may also happen with some of the other RLECs where cable does not reach.

 

Packer

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giofranchi Newbie

giofranchi

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But there are well-run cable companies available. TWC trades at 1.3x sales, compared to CHTR trading at 1.5x sales. Where is the upside, even if Rutledge runs the company as efficiently as TWC?

 

constructive,

you surely know better than me that you don’t buy a company for what it is earning now, you buy a company for what it will earn in the future. Especially if you think that company is a unique opportunity to take a vehicle and grow it.

And you surely know better than me the P/E or P/S ratios are completely meaningless, when you believe that the rate of growth of free cash flow can be very, very strong.

So, why CHTR at 1.5 x sales and not a well-run company like TWC at 1.3 x sales? But precisely because TWC is already a well-run company… You go where you see value still unexploited by others, not where value is already evident to everyone… I guess the fact that it is difficult to see any upside is precisely the reason why Mr. Malone is making this investment: he sees what other people miss. ;)

On the contrary, it is clear that Mr. Malone doesn’t think TWC is a unique opportunity to take a vehicle and grow it, and therefore he doesn’t think its rate of growth of free cash flow can be very, very strong.

 

giofranchi

 

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constructive Newbie

constructive

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gio,

I think we should keep in mind that Charter is not a startup. It is a huge, capital intensive business which depends on recurring revenue streams. There are limits to what is probable in terms of margins and growth.

 

If Charter sold at the same valuation as other cable companies, Malone's ownership and involvement would be attractive to me. But it trades at a much worse valuation. (Price to sales is similar, but CHTR needs to increase margins around 1300 basis points.) Right now it's like a car stuck in a ditch, when the other cars have already started the race.

 

Normally, like you, I know better than to bet against Malone.

 

On the other hand, Buffett says, "Turnarounds seldom turn." Value investors have seen plenty of examples of underestimating turnaround difficulty: SHLD, JCP, FTP, LVLT, ATPG, JMBA, CLWR, etc.

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ItsAValueTrap Newbie

ItsAValueTrap

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1- The CEO of Charter is one of the best in the industry.  I think that he is a huge, huge factor in why Malone invested in Charter.

 

2- It is definitely a turnaround.  And I do dislike turnarounds because they often fail to materialize.  But I have no problem with betting on turnarounds with superstar CEOs.  Usually those turnarounds work out.  Malone has a long history of turning around cable operations himself... he would buy up other cable companies, install his lieutenants, and get rid of a lot of excess.

 

3- With Charter, the relevant metric might be enterprise value per home crossing.

 

Right now, they are in a lot of homes but they don't have that many customers percentage-wise.  With the new CEO, they will probably work their way up in terms of paying customers.

 

capital intensive

It's... not.  Their returns on capital can be high especially when banks let them get leveraged to the hilt.  (Though this leverage can be dangerous... the first few years of TCI under Malone wasn't pretty at all.  And Malone sold low in 2008/2009 because of his personal leverage.)

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giofranchi Newbie

giofranchi

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gio,

I think we should keep in mind that Charter is not a startup. It is a huge, capital intensive business which depends on recurring revenue streams. There are limits to what is probable in terms of margins and growth.

 

If Charter sold at the same valuation as other cable companies, Malone's ownership and involvement would be attractive to me. But it trades at a much worse valuation. (Price to sales is similar, but CHTR needs to increase margins around 1300 basis points.) Right now it's like a car stuck in a ditch, when the other cars have already started the race.

 

Normally, like you, I know better than to bet against Malone.

 

On the other hand, Buffett says, "Turnarounds seldom turn." Value investors have seen plenty of examples of underestimating turnaround difficulty: SHLD, JCP, FTP, LVLT, ATPG, JMBA, CLWR, etc.

 

constructive,

I basically agree with you. I only wanted to point out the fact that I seriously doubt Mr. Malone uses words lightly: he very well knows he will be remembered! And, if he talks about a rate of growth of free cash flow that can be very, very strong, I am inclined to believe he has a very well defined plan in mind. Until you know what that plan exactly is, P/E or P/S ratios won’t be useful to you.

 

Now, examine each one of the failed turnaround examples you mentioned, think about the value investor who championed it and his/her experience in that specific business or industry. And compare it to Mr. Malone and the cable TV business… Completely different situations, right? If there is someone on planet earth, who could be relied upon turning around a cable TV business successfully, that person is precisely Mr. Malone. He has proven himself over and over again.

 

I am not saying he will be successful. All I am saying is:

1) Mr. Malone has a very well defined plan,

2) It is very difficult to know the true worth of Charter, if you don’t know Mr. Malone’s plan,

3) If Mr. Malone’s plan is carried out successfully, chances are Charter today is a bargain; otherwise, chances are it will prove to be a poor investment.

 

giofranchi

 

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Guest wellmont

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gio,

I think we should keep in mind that Charter is not a startup. It is a huge, capital intensive business which depends on recurring revenue streams. There are limits to what is probable in terms of margins and growth.

 

If Charter sold at the same valuation as other cable companies, Malone's ownership and involvement would be attractive to me. But it trades at a much worse valuation. (Price to sales is similar, but CHTR needs to increase margins around 1300 basis points.) Right now it's like a car stuck in a ditch, when the other cars have already started the race.

 

Normally, like you, I know better than to bet against Malone.

 

On the other hand, Buffett says, "Turnarounds seldom turn." Value investors have seen plenty of examples of underestimating turnaround difficulty: SHLD, JCP, FTP, LVLT, ATPG, JMBA, CLWR, etc.

 

capital intensive? it gushes free cash flow. and it's not really a turnaround. it just was a poorly managed cable company. it now has great management. but even when it came out of bk it was profitable on fcf basis. I expect liberty global to roll it up, perhaps after using chtr currency to consolidate more cable properties.

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