Third Avenue Management, an investment management firm, published its “Small-Cap Value Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. The fund declined 1.27% during the third quarter of 2021 versus a drop of 2.98% for the Fund’s most relevant benchmark, the Russell 2000 Value Index (the “Index”). You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Third Avenue Management, in its Q3 2021 investor letter, mentioned Madison Square Garden Entertainment Corp. (NYSE: MSGE) and discussed its stance on the firm. Madison Square Garden Entertainment Corp. is a New York, New York-based entertainment company with a $2.7 billion market capitalization. MSGE delivered a -24.38% return since the beginning of the year, while its 12-month returns are down by -3.62%. The stock closed at $79.43 per share on November 5, 2021.
Here is what Third Avenue Management has to say about Madison Square Garden Entertainment Corp. in its Q3 2021 investor letter:
“Madison Square Garden Entertainment (MSGE) was added to the portfolio last quarter while no positions were eliminated. MSGE is controlled by the Dolan family and is a leading owner and operator of entertainment assets. The MSGE assets include the Hulu Theatre, Chicago Theatre and Madison Square Garden. In addition, MSGE leases and operates Radio City Music Hall, the Beacon Theatre and has a 63% interest in Tao Group Hospitality which controls 63 high-end restaurants globally. The crown jewel is Madison Square Garden which is the highest-grossing entertainment venue in the world. Being a native New Yorker and life-long Knicks fan, there has been plenty of due diligence performed on these assets over the years!
MSGE’s enterprise value was cut in half in 2021 for a few reasons. First, investors were disappointed with the recent acquisition of Madison Square Garden Networks. The network, which televises Knicks, Rangers, Islanders and Devils games, was previously controlled by the Dolan family and spun off in 2015. Repurchasing the asset was not well-received due to fears of cable networks facing secular decline. Second, MSGE is building a pioneering entertainment venue in Las Vegas named the MSG Sphere. When completed, the 17,500 seat, 360-degree concert venue has the potential to transform live entertainment. MSGE announced the project was experiencing cost overruns which increased investor angst. Finally, the entertainment industry world-wide is facing uncertainty due to Covid-19 and Delta variant threats…” (Click here to see the full text)
Based on our calculations, Madison Square Garden Entertainment Corp. (NYSE: MSGE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. MSGE was in 19 hedge fund portfolios at the end of the first half of 2021, compared to 23 funds in the previous quarter. Madison Square Garden Entertainment Corp. (NYSE: MSGE) delivered a 16.60% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Lithium prices have more than doubled over the past year, so we are checking out this emerging lithium stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
