Wallace Weitz Publishes Annual Letter, Commenting on LBTYK, LINTA, LCAPA
Even his fellow citizen in the same city, Warren Buffett should be proud of Weitz.
In the letter, Weitz commented on a number of stocks that are spun off from the Liberty Media family. Like Buffett, Weitz is also attracted to good management. When he found a good manager in John Malone, he goes all the way with him.
Here is what he said: The Liberty Media family of companies almost always offers something of interest for value investors. There are six publicly traded stocks that were once part of the original Liberty Media. Liberty was a collection of programming companies that were spun off from John Malone’s Telecommunications, Inc. in the 1990’s. We currently own five of these companies—Liberty Global, Liberty Interactive, Liberty Capital, Liberty Starz, and Discovery Communications. (We also own Ascent Media which is a spinoff from Discovery.) John Malone has been a master of acquiring assets on favorable terms, building media businesses and creating value for shareholders.
Liberty Global (LBTYK) owns several international cable television properties (primarily in Europe). Management has grown per share value rapidly, both organically and through acquisition, and has bought back roughly half of its outstanding shares since it was spun out of Liberty Media. Investor concerns about its debt levels and the weakness in several European economies have weighed on its stock price, but we believe the stock is cheap.
Liberty Interactive (LINTA) is a “tracking stock” whose assets consist of the QVC home shopping network, a handful of e-commerce businesses and $4-5 per share in marketable securities. The somewhat convoluted tracking stock structure confuses many investors and we believe it has caused the stock to trade at a 25-30% discount to its underlying value. LINTA is scheduled to be spun off from its parent this year. As an independent company that is a leading multi-platform retailer, we believe that QVC will command a higher valuation, as does its primary competitor, HSN. We would also expect to see significant share repurchases by an independent Liberty Interactive/QVC and that would increase its per share business value.
Another Liberty entity with interesting potential is Liberty Capital (LCAPA). Liberty Capital traded under $3 per share in late 2008 and finished 2010 at over $62. However, during that two year period it parlayed a relatively modest purchase of Sirius XM Radio debt into ownership of 40% of the equity of Sirius, worth over $4 billion today. This added about $45 per share to the value of Liberty Capital. So, now the net assets of LCAPA are worth roughly $100 per share and management is busily working on ways to realize that value for shareholders.
You can read Weitz’s complete letter by following this link.
You can also check out his stock portfolio by clicking on Wallace Weitz.