Patrick Brennan of Brennan Asset Management presented his in-depth investment thesis on Liberty Global Group (Nasdaq: LBTY) and Lilac Global (Nasdaq: LILA) at Best Ideas 2018.
Liberty Global (LGI) is a dominant cable operator in Europe, with its five largest markets in the UK, Netherlands, Belgium, Germany, and Switzerland.
In 2015, LGI created a tracking stock (LILAK) that corresponds to the value of its Puerto Rican and Chilean cable systems. LILAK subsequently executed a complicated and controversial merger with Cable & Wireless (CWC) in 2016, partially funding the deal with LGI stock.
LGI shareholders hated that their stock was used to finance a purchase that many would find difficult to hold. Meanwhile, LILAK shareholders suffered significant losses because of LILAK’s poor initial execution following the closing of the transaction.
Both LGI and LILAK have frustrated shareholder bases that have suffered as the broader market has risen 35+% the past two years. However, LILAK’s formal separation from LGI, turning LILAK into an asset-backed company, may lead to a change in sentiment. This separation, along with company-specific catalysts, creates a compelling opportunity for those willing to dig into the complicated names.
About the instructor:
Patrick Brennan is the founder and portfolio manager of Brennan Asset Management, a Registered Investment Advisory firm based in Napa, CA, which utilizes a concentrated value investing strategy. Patrick has given presentations at multiple value investing conferences, including presentations to The New York Society of Security Analysts (NYSSA), The Nebraska Society of Securities Analysts and presentations on various names at the VALUEx Vail Conferences. Patrick coauthored an article on tracking stocks with Lawrence Cunningham for The Financial History Magazine and Patrick was featured in a write-up of Liberty LILAK in The Private Investment Brief. Prior to founding Brennan Asset Management, Patrick managed portfolios and led research efforts at two value investing firms in California: Hutchinson Capital Management and RBO & Co. Previously, Patrick worked at Mark Boyar & Company, where he led the firm’s research team and helped manage $800 million of assets across individual portfolios, institutional accounts and a mutual fund. Patrick also worked for six years in investment banking and equity research with Deutsche Bank, CIBC World Markets and William Blair & Company. Patrick graduated summa cum laude from the University of Notre Dame with a degree in economics and was inducted into Phi Beta Kappa. Patrick received the Chartered Financial Analyst (CFA) designation in 2002 and is a member of the CFA Institute (formerly AIMR). Patrick is originally from Omaha, Nebraska.
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