If you are looking for the best ideas for your portfolio you may want to consider some of Silver Ring Value Partners top stock picks. Silver Ring Value Partners, an investment management firm, is bullish on Fox Corp (NASDAQ:FOX) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Fox Corp (NASDAQ:FOX) stock. Fox Corp (NASDAQ:FOX) is a media company.
On July 15, 2019, Silver Ring Value Partners had released its Q2 2019 investor letter. The investment firm said it bought Fox Corp (NASDAQ:FOX) stock in Q2 2019. Fox Corp (NASDAQ:FOX) stock has posted a return of -12.1% in the trailing one year period, underperforming the S&P 500 Index which returned 13.7% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, Fox Corp (NASDAQ:FOX) stock has fallen by 20.7%.
In Q2 2019 investor letter, Silver Ring Value Partners said the fund posted a return of 5.6% in the last 12 months, underperforming fund’s benchmark the Russell 3000 Index which returned 9.0% in the same period. Let’s take a look at comments made by Silver Ring Value Partners about Fox Corp (NASDAQ:FOX) stock in the Q2 2019 investor letter.
“Fox Corporation was created following the sale of a portion of the business to Disney. What remains is the Fox News network, FOX broadcast network and major-market TV stations, as well as the national sports cable networks. Of all the assets, Fox News is by far the most important, contributing approximately 75% of normalized profitability. It is also the one that has the strongest sustainable competitive advantage. Almost half of the country perceives it as a must-have network, and it therefore enjoys very inelastic demand. I consider the business to be of Excellent quality. The management team is experienced and has a good track record of value creation. They have recently shown restraint in not bidding to recoup the regional sports network business that the predecessor company sold to Disney and that the latter was forced to divest. Finally, the balance sheet is in solid shape, with net Debt/EBITDA at under 2.5x.
My range of values is between $20 and $107, with a base case of $56. This is driven by a business that I believe has normalized EPS/FCF of $2.75-$3.00 in a few years that is growing in the midsingle digits. The company also has a number of excess assets that are worth close to $10/share. The largest of these is a sizable NOL which allows it to reduce its cash taxes for many years, as well as a stake in Roku and a valuable studio lot. I purchased the stock at ~ $35/share, or around 11x forward 12 months normalized EPS excluding excess assets. I sized the investment as a small, 5%, position because 1) the downside is > 35% and 2) this investment has meaningful correlation of long-term business outcomes with our Discovery investment. I do believe that the two companies are complementary, and both are positioned to avoid the competitive fiction content market. Longer-term it wouldn’t surprise me if Discovery and Fox merge as this would give them even more scale and make their combined offering even more must-have.”
Last month, we published an article revealing that Baupost Group hedge fund is bullish on Fox Corp (NASDAQ:FOX) stock. The investment firm said Fox Corp is one of the top 5 holdings as of June 30, 2020.
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Video: Top 5 Stocks Among Hedge Funds
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