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James Li
James Li
Articles (586)  | Author's Website |

Seth Klarman Plunges Into Time Warner in 4th Quarter

Baupost’s latest bet offers good growth potential in the current year

February 14, 2018 | About:

Baupost Group manager Seth Klarman (Trades, Portfolio) disclosed Tuesday that he placed a big bet on Time Warner Inc. (NYSE:TWX) during fourth-quarter 2017.

The guru invested in 8.1 million shares of Time Warner for an average price of $94.52 per share. With this transaction, Klarman expanded his portfolio 7.35%.


Company background

New York-based Time Warner classifies its business into three reportable segments: Turner, Home Box Office (HBO) and Warner Bros. Time Warner CEO Jeff Bewkes said the company had a strong 2017, highlighted by increased revenues and profits across its operating segments and continued investments to “capitalize on the growing demand for the most creative and compelling content.” The New York-based entertainment company reported $31.3 billion in revenues, up 7% from the prior year.


GuruFocus ranks Time Warner’s profitability 8 out of 10 as the company has expanding operating margins and strong returns on equity. The company’s margins and returns outperform over 84% of global competitors.



Company offers good business outlook for 2018

For the current year, Time Warner expects full-year adjusted operating income growth in the high single digits, driven by good growth potential in each of the company’s reporting segments. Turner, the company’s cable network business, anticipates subscription revenues in the mid-single digits and lower programming costs from the prior year.

Even though management expects content revenues to decline from the prior year, HBO’s subscription revenues are expected to increase enough to offset the growth in expenses. Finally, Warner Bros. operating income is expected to increase primarily due to higher television licensing revenues from the Harry Potter franchise.

Disclosure: No position in Time Warner.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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