Argosy Investors is Hopeful about Warner Bros. Discovery (WBD) After Spin-Off

Argosy Investors, an investment management company, recently released its second quarter 2022 investor letter. A copy of the same can be downloaded here. Year to date, the fund returned -25.4% in select accounts compared to -20% for the S&P 500. The main reason for the fund’s underperformance was the poor performance of its most significant holdings. For more information on the fund’s top picks in 2022, please check its top five holdings.

Argosy Investors discussed stocks like Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its Q2, 2022 investor letter. Headquartered in New York, New York, Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a worldwide content provider across various distribution platforms. It has a market capitalization of $33.331 billion. On August 19, 2022 Warner Bros. Discovery, Inc. (NASDAQ:WBD) closed at $13.73 per share. One-month return of Warner Bros. Discovery, Inc. (NASDAQ:WBD) declined to -6.50% and its 12-month return dropped to -36.97%.

Here is what Argosy Investors specifically said about Warner Bros. Discovery, Inc. (NASDAQ:WBD):

“I purchased shares of AT&T (T) prior to its spin-off of Warner Bros. Discovery, Inc. (NASDAQ:WBD). Most people are probably familiar with AT&T. They are a major cellular service provider, and until recently owner of the Time Warner media assets, which include HBO, CNN, TNT, TBS, Cartoon Network, DC Comics and the Batman content brands, and more. At the time of my purchase, I estimated that the combined T/WBD assets traded at a 15% levered FCF yield, or 6x FCF. I also believe that WBD, which now has HBO Max, has future growth in front of it which was previously in doubt when Discovery was primarily tied to the declining cable television bundle. Since then, Netflix reported disappointing subscriber growth, which threw all streaming companies into disarray. WBD followed that news with a disappointing outlook on its business during its own quarterly earnings.

As a result, shares of WBD have declined nearly 40% since the spin-off. WBD now trades for 7x 2023E FCF and there is great potential for returns over the next few years as WBD pays down debt used to finance its merger combining Warner Brothers and Discovery and grows. We do not own a large position in WBD at present, but we may add to it over time.”

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Warner Bros. Discovery, Inc. (NASDAQ:WBD) is not on the list of 30 Most Popular Stocks Among Hedge Funds. At the end of first quarter Warner Bros. Discovery, Inc. (NASDAQ:WBD) was held by 68 hedge fund portfolios compared to 47 in the previous quarter.

We discussed Warner Bros. Discovery, Inc. (NASDAQ:WBD) in another article and shared Smead Capital Management insights about the company. You can check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other prominent investors.

Disclosure: None. This article is originally published at Insider Monkey.