Several stocks in the portfolio had strong returns in the quarter. Entertainment holding company, Madison Square Garden Entertainment Corporation (MSGE, Financial) advanced following an earnings beat driven by strength in its core entertainment business, including the Christmas Spectacular. The company is moving forward with the spin-off of its live entertainment business which will be named Madison Square Garden Entertainment. The remaining company will be called MSG Sphere Corporation and will include MSG Networks, TAO Hospitality Group and MSG Sphere, its upcoming Las Vegas property. In our view, this divestiture, which is expected to close in April, will address different investor bases. We think MSG Sphere Corporation will offer higher growth plus reasonable cash flow initiatives. Meanwhile, although the remaining assets are generally slower growing, they are also stable cash flow generators which should enable deleveraging. Looking ahead, we remain bullish on premium live entertainment, digital access to sports, as well as the opportunity at the Sphere. We believe the underlying value of MSGE’s physical assets coupled with management’s expertise make this an attractive opportunity.
From John Rogers (Trades, Portfolio)' Ariel Fund first-quarter 2023 commentary.
