Murray Stahl Slashes Portfolio but Remains Bullish on These Five Stocks

Murray Stahl founded Horizon Asset Management LLC, an investment firm under the umbrella of Horizon Kinetics LLC, in 1994. Mr. Stahl serves as the portfolio manager of Horizon Asset Management LLC, which employs a contrarian approach to investing and seeks to exploit the short-term focus in equity markets. Put it differently, the investment firm’s main pillar of growth and philosophy relies on the idea that short-termism in equity markets generates “sub-optimal” returns over a long period of time. Thus, the New York-based investment boutique employs a long-term, contrarian, fundamental value investment philosophy, so retail investors sharing a similar investing approach may find interesting investment opportunities by examining the firm’s 13F filings. Mr. Stahl’s Horizon is one of the first investment firms monitored by Insider Monkey to report their quarterly 13Fs for the first quarter of 2016. Murray Stahl and his team conducted a serious portfolio rebalancing during the first quarter of this year, as the investment firm reduced 300 positions and sold out 19 positions. At the same time, Horizon opened 39 new holdings and increased exposure to 120 existing positions during the first three months of 2016. With that in mind, the following article will lay out the top five positions of Horizon as of the end of March, as well as discuss what Mr. Stahl thinks about some of those positions.

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#5. Dreamworks Animation Skg Inc. (NASDAQ:DWA)

– Number of shares held by Horizon as of March 31: 7.21 Million

– Value of Horizon’s holding as of March 31: $179.91 Million

Murray Stahl’s Horizon trimmed its stake in Dreamworks Animation Skg Inc. (NASDAQ:DWA) by 938,683 shares during the first quarter of 2016 to 7.21 million shares, which were valued at $179.91 million on March 31. Dreamworks Animation is an animation studio that has released more than 30 animated feature films, with its business plans targeting two animated feature films per year. The company’s growth also relies on AwesomenessTV (ATV), which is a multi-media platform company that generates revenues from online advertising sales and distribution of content through media channels such as short-form online video, theatrical, home entertainment and television. Dreamworks acquired ATV in May 2013 for an initial cash consideration of $33.5 million, but the total consideration for this transaction has reached $128.5 million. Earlier this month, Verizon Communications Inc. (NYSE:VZ) acquired a 24.5%-stake in this digital entertainment network for approximately $160 million. Dreamworks continues to own a 51%-stake in AwesomenessTV, which has nearly 3.7 million subscribers on YouTube. The company’s revenues for 2015 reached $915.9 million, which increased from $684.6 million in 2014. Feature Films segment revenues, which accounted for 57% of total revenues in 2015, increased 14.7% year-on-year to $520.1 million. Shares of Dreamworks Animation are up 7% year-to-date. Analysts at Pacific Crest Securities, who have an ‘Overweight’ rating on Dreamworks and a price target of $31, recently said that ATV is set to become a “material layer of growth” for the company. Mason Hawkins’ Southeastern Asset Management was the largest equity holder of Dreamworks Animation Skg Inc. (NASDAQ:DWA) within our database at the end of 2015, holding 16.14 million shares.

#4. Liberty Media Corp (NASDAQ:LMCK)

– Number of shares held by Horizon as of March 31: 5.35 Million Series C Shares

– Value of Horizon’s holding as of March 31: $203.83 Million

The New York-based investment boutique also reduced its exposure to Liberty Media Corp (NASDAQ:LMCK) by 577,774 shares during the first three months of 2016, ending the first quarter with 5.35 million shares worth $203.83 million. Earlier this week, Liberty Media completed a previously-announced transaction to split its common stock into three new tracking stocks: the Liberty Braves common stock, the Liberty Media common stock, and the Liberty Sirius XM common stock. Under the so-called recapitalization transaction, each share of Liberty’s common stock was reclassified and exchanged for one share of Liberty SiriusXM common stock, 0.1 of a share of Liberty Braves common stock, and 0.25 of a share of Liberty Media common stock. This move may enable analysts and investors to value more accurately each business that comprised the original Liberty Media. The Liberty SiriusXM tracking stock reflects the economic performance of SIRIUS XM, whose business operations involve the transmission of music, sports, entertainment, comedy, and other channels on a subscription fee basis through two proprietary satellite ratio systems. The Liberty Braves tracking stock relates to Braves Holdings, which is the indirect owner and operator of the Major League Baseball club the Atlanta Brave. Meanwhile, the Liberty Media tracking stock reflects the performance of all businesses other than those attributed to the Liberty Braves tracking stock and Liberty SiriusXM tracking stock. Warren Buffett’s Berkshire Hathaway owned 15.39 million Series C shares of Liberty Media Corp (NASDAQ:LMCK) at the end of 2015.

#3. Icahn Enterprises LP (NASDAQ:IEP)

– Number of shares held by Horizon as of March 31: 3.51 Million

– Value of Horizon’s holding as of March 31: $221.13 Million

Mr. Stahl’s investment firm owns nearly 3.51 million shares of Icahn Enterprises LP (NASDAQ:IEP) as of the end of the March quarter, 91,800 shares less than at the end of December. The 3.51 million-share stake was valued at $221.13 million on March 31. Icahn Enterprises is a diversified holding company that owns subsidiaries engages in various operating businesses such as automotive, energy, railcar, and others, as well as manages a multi-billion-dollar investment portfolio. Mr. Stahl discussed his firm’s investment in Icahn Enterprises in a recent quarterly letter to investors, saying that “Icahn Enterprises also has a unique and very valuable feature. It holds short/swap positions that would benefit from three separate scenarios that could be disastrous for (or reflect a disastrous development in) the financial markets: expanding credit spreads (that is, trouble in the high-yield market), a lower stock market, and/or higher interest rates.” Moreover, the fund’s fourth-quarter investor letter said that “The shares trade at 1.0x IEP’s calculation of NAV. In that sense, they trade at liquidation value, inclusive of investments made at what were determined by an activist deep value investor to be undervalued prices, many of which have declined sharply from there. The return from this portfolio in recovery mode would obviously be quite large.” Shares of Icahn Enterprises LP have gained 2% year-to-date, but are down 30% in the past 12 months. Jim Simons’ Renaissance Technologies acquired a new stake of 35,497 shares in Icahn Enterprises LP (NASDAQ:IEP) during the final quarter of 2015.

#2. Texas Pacific Land Trust (NYSE:TPL)

– Number of shares held by Horizon as of March 31: 1.65 Million Sub-Share Certificates

– Value of Horizon’s holding as of March 31: $239.51 Million

Murray Stahl and his team were mildly bullish on Texas Pacific Land Trust (NYSE:TPL) during the first quarter of this year, as they boosted the stake in the company by 30,441 shares during the three-month period. Horizon owns a stake of 1.65 million shares of the landowner as of March 31, which are valued at $239.51 million. Texas Pacific Land Trust is one of the largest landowners in Texas, owning approximately 909,274 acres located in 18 different counties. The trust generates revenues from various avenues, including oil and gas royalties, grazing leases, easements, sundry and specialty leases, as well as land sales. The company’s total operating and investing revenues for 2015 reached $79.44 million, up from $55.22 million reported for 2014. Presumably, the increase was mainly driven by higher land sales and easements and sundry income, partially offset by lower oil and gas royalty revenue. Net income for 2015 increased to $50.04 million from $34.77 million in 2014. In February, the company’s Board of Trustees declared a cash dividend of $0.31 per sub-share. Texas Pacific Land Trust has increased annual dividend payments for 13 consecutive years. Paul J. Isaac’s Arbiter Partners Capital Management had 114,598 sub-share certificates of Texas Pacific Land Trust (NYSE:TPL) in its equity portfolio at the end of 2015.

#1. Howard Hughes Corp (NYSE:HHC)

– Number of shares held by Horizon as of March 31: 3.70 Million

– Value of Horizon’s holding as of March 31: $392.31 Million

Howard Hughes Corp (NYSE:HHC) was the largest equity holding in Horizon’s equity portfolio at the end of the January-to-March quarter, comprised of 3.70 million shares valued at $392.31 million. The New York-based investment firm trimmed its stake in the company by 483,769 shares during the first quarter of this year. The quarter-end stake accounted for 9.74% of the firm’s equity portfolio. Howard Hughes operates as a real estate company, which was spun out of General Growth Properties Inc. (NYSE:GGP) when exiting bankruptcy protection back in 2010. Howard Hughes emerged as a public company as a collection of 34 under-appreciated assets, including retail, office, multi-family and hospitality properties. One of those properties included the South Street Seaport in Manhattan, which “was on the books for a few million dollars” when the company was spun off, according to Horizon’s fourth-quarter letter to investors mentioned above. New York’s South Street Seaport is one of the most visited tourist attractions around the globe. Mr. Stahl and his team believe that “the cash flows from the Howard Hughes development activities will climb rapidly” in the foreseeable future. “When they do, they can be shielded to some extent by the company’s $300+ million operating loss carryforwards. However, as its taxable income becomes significant in the next few years, the company is likely to think about both the allocation of that income, perhaps toward paying dividends, and tax efficiency, perhaps toward becoming a REIT. Either or both of those actions could reposition the company into the mainstream of publicly-traded real estate. The shares are down 38% from their 2015 high. By our calculations, they are likely worth easily twice the current price”, said Horizon in the aforementioned letter to investors. Meanwhile, shares of Howard Hughes are down 9% so far in 2016. Bill Ackman’s Pershing Square was the owner of 3.57 million shares of Howard Hughes Corp (NYSE:HHC) at the end of 2015.

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