Robert King of Baskerville Capital Management presented his in-depth investment thesis on Discovery Communications (Nasdaq: DISCA) at Best Ideas 2018.
Discovery is a media and entertainment company whose channels include the eponymous Discovery Channel, The Learning Channel, Animal Planet, Investigation Discovery, OWN, Science, Velocity, and Eurosport. Discovery is one of few media companies with a truly global presence; it derives roughly half of revenue from domestic subscribers and a little less than half of revenue from international subscribers. The recently announced acquisition of Scripps Networks has created an interesting situation that causes the company to trade at a pro forma FCF yield of 16% despite pro forma run-rate ROIC of ~26%. Domestically, Discovery should benefit defensively from the acquisition of Scripps as it gives the company more scale when it puts itself in front of distributors and advertisers. Internationally, the Scripps acquisition provides a way for Discovery to continue international revenue growth as the company grows the Scripps channels’ miniscule international revenue. Rob believes that, in a few years, the company will be worth multiples of the recent price, benefiting from earnings growth and multiple expansion.
About the instructor:
Robert King is the founder and chief investment officer of Baskerville Capital Management, a private investment manager that focuses on a concentrated portfolio of investments. Baskerville relies on fundamental analysis to find mispriced companies within misunderstood industries that are currently undergoing a structural change. This approach gives Baskerville the best chance of finding wonderful companies selling at a reasonable price. Prior to founding Baskerville Capital Management, Robert was a lawyer at a law firm working on corporate and restructuring matters. Robert holds a BA in Mathematics and a BS in Neurobiology from The University of Texas at Austin, a JD from Georgetown University, and an MBA from Yale University.
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