Baron Funds, an asset management firm, published its “Baron Real Estate Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. The Baron Real Estate Fund (the “Fund”) declined 10.76% (Institutional Shares) in the first quarter of 2022, modestly outperforming its primary benchmark, the MSCI USA IMI Extended Real Estate Index (the “MSCI Real Estate Index”), which declined 11.03%. The Fund underperformed the MSCI US REIT Index (the “REIT Index”), which declined 4.28%. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Baron Real Estate Fund mentioned Madison Square Garden Entertainment Corp. (NYSE:MSGE) and explained its insights for the company. Founded in 2020, Madison Square Garden Entertainment Corp. (NYSE:MSGE) is a United States-based entertainment holding company with a $2.1 billion market capitalization. Madison Square Garden Entertainment Corp. (NYSE:MSGE) delivered a -8.63% return since the beginning of the year, while its 12-month returns are down by -30.50%. The stock closed at $64.27 per share on May 23, 2022.
Here is what Baron Real Estate Fund has to say about Madison Square Garden Entertainment Corp. (NYSE:MSGE) in its Q1 2022 investor letter:
“We recently acquired shares in Madison Square Garden Entertainment Corp. (“MSGE”) at what we believe was a highly discounted average price of only $68 per share. From its peak of $121 per share in March 2021, the stock declined more than 40% due to setbacks in indoor live entertainment amid the COVID-19 resurgence and real estate construction delays. The company owns iconic sports and entertainment real estate venues such as Madison Square Garden, the Chicago Theater, and is building a new state-of-the-art venue in Las Vegas, the MSG Sphere at The Venetian (slated to open in 2023). In addition, MSGE has long-term leases at Radio City Music Hall and the Beacon Theatre, while also maintaining a controlling stake in restaurant group TAO.
Our investment thesis in MSGE is based on the following:
- We believe cash flow will quickly meet or exceed 2019 levels with live events and entertainment returning to normalized levels. This trend should be aided by meaningful tailwinds due to easing COVID restrictions and receding health concerns combined with substantial consumer savings and prioritization of experiences over goods.
- We believe the Sphere in Las Vegas will not only lead to incremental cash flow growth for the company but will also allow for further value creation.
- We believe the company is trading a substantial discount to our estimate of intrinsic value of $100 in a base case and $150 in an upside case. We believe the ramp in live entertainment cash flow combined with the Sphere completion and visibility on development returns should help shine a light on this value.”
Our calculations show that Madison Square Garden Entertainment Corp. (NYSE:MSGE) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Madison Square Garden Entertainment Corp. (NYSE:MSGE) was in 17 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 19 funds in the previous quarter. Madison Square Garden Entertainment Corp. (NYSE:MSGE) delivered a -18.65% return in the past 3 months.
In March 2022, we also shared another hedge fund’s views on Madison Square Garden Entertainment Corp. (NYSE:MSGE) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
