Why DIRECTV is Attracting a Who’s Who of Investment Managers
A bunch of famous value investors took a shine to DIRECTV Group (DTV) earlier this year, and already, they’re making us jealous. Apparently, when Warren Buffett, Chuck Akre and Barry Rosenstein target the same stock, one might want to consider joining in.
Buffett’s Berkshire Hathaway (BRK.B) has been buying big since the last quarter of 2011. Akre of Akre Capital Management suddenly made DIRECTV 3.6% of his fund last quarter. In May, Barry Rosenstein’s hedge fund Jana Partners LLC reported a new stake in DIRECTV as its third largest holding.
As shareholders, they joined Bill Nygren and Mason Hawkins, who have owned DIRECTV as major portfolio holdings for years. Both of them have been selling shares recently, but possibly more as portfolio balancing or cash raising exercises rather than bearishness. DIRECTV still represents about 4.4% of Nygren’s Oakmark Select portfolio, according to dataroma. It’s slightly more than 7% of Hawkins’ Longleaf Partners portfolio.
As a dividend-less, debt-heavy company in an old school tech business, DIRECTV doesn’t seem like an obvious choice for this largely value-loving crowd. The company sells satellite television subscriptions in a competitive space that includes not only other satellite companies -- mainly, DISH Network Corp (DISH) -- but also streaming businesses like Netflix (NFLX), Hulu and Amazon.com (AMZN). It’s only going to get worse when Apple (APPL) and Google (GOOG) really get in the game. Already, DIRECTV lost U.S. subscribers last quarter, the first time in its history that’s happened.
But it more than made up the difference for those losses with new customers in Latin American. Prospects there are particularly sunny, and those countries are feeding earnings nicely now.
Really, though, it’s probably the cash that everyone likes; particularly when it’s used for a generous share buyback program.
Filed under: Company Analysis