It was a quiet quarter at Liberty Media (LMCK) and Liberty Sirius (LSXMK) after the companies were spun off as tracking stocks from Liberty Media’s corporate holding company earlier this year.  The good news is that the major assets held by each company performed well in the quarter.  In addition, transactions completed on smaller assets owned by each company added meaningful cash to their balance sheets and simplified the stories.

LSXMK owns 64% of Sirius Satellite Radio (SIRI).  Besides some cash and debt this is the only asset owned by LSXMK.  SIRI had a strong quarter, beating Wall Street estimates and raising guidance for 2016.  Eventually we expect LSXMK and SIRI to merge, probably in 2017 or 2018.  SIRI is aggressively buying back its own stock with its significant and consistently generated free cash flow.  By the end of 2017, LSXMK will own nearly 80% of SIRI at which point a merger makes sense.  That would be good for LSXMK which trades at an unwarranted 15% discount to SIRI.  In the meantime, We think SIRI is well positioned to continuing growing subscribers even as new car sales plateau at high levels.  Recent success in used cars looks sustainable as SIRI has programs to reach used car buyers who inherit a car with a Sirius radio.

LMCK owns 35% of Live Nation (LYV).  LYV dominates the global concert and ticketing industries.  In its most recent quarter, LYV reported results better than expectations as the summer concert is booming.  This comes as no surprise to Northlake as we have closely followed the shifts in the music industry that are pushing touring to be the primary economic vehicle for artists to make money.  Additionally, the trend by consumers to value experiences over things plays right to LYV’s strength.  We expect continued growth in the seasonally large third quarter and years ahead as LYV captures more dollars from consumers and advertisers looking to reach its massive global audience of adults aged 18-54.  LYV shares moved to a new 52 week high after reporting its 2Q16 results and we see further upside ahead.

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.