Liberty Media reported results following its split into three tracking stocks.  Northlake sold the shares that track ownership of the Atlanta Braves, the team’s new stadium, and the real estate development adjacent to the stadium.  We continue to hold shares in Liberty Sirius (LSXMA/LSXMK) and Liberty Media (LMCA/LMCK).  We read nothing in the quarterly reports and heard nothing on the conference calls that dissuade us from our view that both stocks have attractive upside.

LSXMA/K tracks the controlling ownership in Sirius XM Satellite Radio (SIRI).  SIRI reported a good quarter a couple of weeks ago so nothing new came out of Liberty as it relates to the outlook for SIRI.  Management did offer several comments on the ultimate combination of LSXMA/K and SIRI.  The comments were in line with our expectation that this could occur within the next two years.  SIRI is aggressively buying back its own stock and Liberty’s interest is now up to 63%.  At the current pace that ownership will exceed 80% by the end of 2017 at which point we feel a combination is highly likely.  LSXMA/K trade at an 11% discount to SIRI, which is hard to explain given that Liberty controls the company.  As long as SIRI fundamentals look solid, we sit and wait with knowledge that eventually we get upside as SIRI shares rise and an 11% bonus as the discount in LSXMA/K narrows.

The story is much the same at the new LMCA/K.  In this case, Liberty owns 35% of Live Nation Entertainment (LYV).  In turn, LYV shares make up about 82% of the value of LMCA/K.  The discount to net asset value for LMCA/K is around 18% as there is less clarity on the path forward for LYV and LMCA/K and there are other assets including cash that create uncertainty.  We still feel that the 18% discount is much too wide providing incremental upside as LYV continues to grow adjusted operating income at 10% a year.  Much has been made of the shift in consumer preferences form buying things to buying experiences.  LYV’s dominant global position in concerts and ticketing provides one the best experiences for consumers, especially the highly desired and hard to reach millennials.  LYV is also benefitting from the shift of economics in the music industry form album sales to touring.

LMCA. LMCK, LSXMA, and LSXMK are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.  LMCA. LMCK, LSXMA, and LSXMK are net long positions in the Entermedia Funds.  Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.