Finally, we purchased shares of Sony Corporation (NYSE:SNE) during the period, and have added to the investment subsequent to April 30th such that as of this writing Sony is a meaningful investment for the Fund. Sony has enjoyed a long and impressive business history, but the business had gradually lost momentum and relevance, particularly during the decade prior to 2012. However, in recent years Sony has mounted an impressive comeback driven by new management that has, in our view, done an effective job of re-focusing the sprawling conglomerate to emphasize those areas where it has the strongest advantages. Today, Sony’s major business units seem to be well-positioned in some of the more attractive growth markets we can identify. Sony is one of three companies (and the leader) in video gaming hardware and the surrounding ecosystem with its PlayStation business. Sony Music is one of three major players in a space that is benefitting dramatically from the digital migration of music, and Sony is also one of the top players in movies and TV production, where it has been showing strong improvement. There are a lot of other assets in place at Sony (too many to describe briefly), but suffice it to say that after doing our research, we came to the conclusion that Sony offers considerable value for a reasonable price. Based on our valuation efforts we think the stock is priced at roughly 10-11X the annualized average free cash flow generated by the core non-financial businesses. We think this valuation leaves plenty of opportunity for favorable returns if Sony continues to execute, and we also see potential for Sony to enact various corporate actions to better showcase the value of some of its unique assets over time, which could take the form of a spin-off or the sale of one or more of Sony’s business units.
From Zeke Ashton (Trades, Portfolio)'s first-half 2018 shareholder letter.
