Black Bear Value Partners, an investment management firm, published its third-quarter 2022 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of -2.4 was recorded by the fund for the third quarter of 2022 resulting in a year-to-date return of +0.7%. Meanwhile, its benchmarks, the S&P 500 and HFRI Index delivered -8.0% and -5.7% returns respectively for the same period. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.
In its Q3 2022 investor letter, Black Bear Value Fund mentioned Madison Square Garden Entertainment Corp. (NYSE:MSGE) and explained its insights for the company. Founded in 2022, Madison Square Garden Entertainment Corp. (NYSE:MSGE) is a United States-based entertainment holding company with a $1.5 billion market capitalization. Madison Square Garden Entertainment Corp. (NYSE:MSGE) delivered a -34.67% return since the beginning of the year, while its 12-month returns are down by -34.39%. The stock closed at $45.95 per share on October 14, 2022.
Here is what Black Bear Value Fund has to say about Madison Square Garden Entertainment Corp. (NYSE:MSGE) in its Q3 2022 investor letter:
“MSGE has been a top 5 holding in prior years. Their primary assets include the Madison Square Garden arena, MSGN (the regional sports network), Tao Group, the Radio City Rockettes show, and an in-construction entertainment venue in Las Vegas called the Sphere. Management has recently disclosed their intent to explore a spin-off of the Sphere and Tao into a new entity.
These assets have historically traded at a “Dolan Discount”. Some of that discount is warranted as management has sometimes taken actions to benefit some shareholders while harming others (Selling MSGN at a steep discount to MSGE). Alternatively, management has also been thoughtful about spins and share buybacks to benefit shareholders.
The Sphere is a $2BB endeavor that’s ~65% complete and planned to open in the 2nd half of 2023. Until then the Company will be spending the bulk of their cash to complete the development. Part of the opportunity revolves around the uncertainty of the value of the Sphere as well as inflationary pressures for the remaining costs. In our downside we incorporate 25% inflation on the remaining costs as well as a 50% write-down of the asset. I don’t believe this to be the case but provides more of a proof point as to how cheap the entity is trading.
If we take the above-mentioned haircut to the Sphere and haircut their other assets, we arrive at a net asset value of $2.1bb or $62 a share as compared to a price in the mid $40’s. Based on more reasonable estimates I arrive at a fair price that’s 2-3x where the equity is trading now.”
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 11 hedge fund portfolios at the end of the second quarter of 2022, compared to 14 funds in the previous quarter. Madison Square Garden Entertainment Corp. (NYSE:MSGE) delivered a -17.16% return in the past 3 months.
In May 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 Q3 page.
Disclosure: None. This article is originally published at Insider Monkey.