Liberty Media Braves Group (BATRA)
Christopher Marangi, co-chief investment officer at Gabelli Funds, favors companies with “a defensible competitive advantage, good balance sheet and good management.” He’s betting that Liberty Media, headed by billionaire John Malone, has all those qualities. He’s also looking for companies with pricing power. “Inflation is probably here for longer than many believe,” he said.
Liberty Media is a very complex company. Unique among major companies, Liberty Media’s common stock was recpatalized in 2016 into three tracking stocks: Liberty Sirius XM group, Liberty Formula One Group and Liberty Braves Group—the one that holds Marangi’s particular interest.
Investors generally aren’t attracted to tracking stocks. They don’t pay dividends and shareholders have no say in company operations. But Marangi is drawn to the company’s primary asset: the Atlanta Braves baseball team, which won the World Series last year, and the surrounding commercial real estate development around the team’s stadium, SunTrust Park.
Many investors shy away from investing in sports franchises, citing lousy long-term performance of sports stocks, with Madison Square Garden being one example.
Liberty indeed might be a complicated company, but in Marangi’s view, investors needn’t take smart pills to appreciate the catalyst to the stock here: the likely sale of the Braves to a private buyer, probably within 18 months. He suggests, given the current $26.31 price, that the market is valuing the championship franchise at $1.5 billion. Marangi bets it fetches a higher price.
“We think there’s significant upside. The stock is at 26 but we think it’s worth into the 40s,” says Marangi. “We love live entertainment and sports franchises; they benefit from their scarcity value.”
Fresenius SE (FRE.DE)
From their perch in Stamford, Conn., the fund managers at Tweedy, Browne, see a world awash in value opportunities. One of the stocks managers Robert Wycoff and Thomas Shrager have added recently to one of their international funds is Fresenius, a healthcare conglomerate based in Germany.
It has little name recognition on this side of the pond, but the $37 billion company is the largest dialysis firm in the world, accounting for about 35% of the global dialysis market, notes Morningstar. They also benefit from being the world’s only fully integrated dialysis business. In addition, Fresenius operates private hospitals in Germany and Spain.
Strager notes that all the company’s businesses have been negatively impacted by Covid pandemic. For example, with hospitals being inundated with Covid patients there’s less need for Fresenius medical supplies.
But the fund manager notes that the number of elective surgeries are already increasing. In addition, the stock’s valuation, at 11 times earnings with a 2% dividend yield, are enticing. Importantly, the stock is also enjoying significant insider buying, note the Tweedy managers.
“The stock is trading at 36 but it has intrinsic value in excess of 50,” said Shrager.