Background: Warner Bros Discovery, one of our earliest portfolio names, might be bought out and merged with Paramount Skydance as reported by Wall Street Journal last week. This post depicts our journey with this stock since 2023. The situation is “live” and circumstances will be changing rapidly. We will monitor and update when new salient information becomes available. This is not investment advice.
Warner Bros Discovery (Ticker: $WBD) is one of our portfolio names and after last week, it delivered 126% return over 2 years. Well, if we had timed it better, it could have been 126% in 10 months. As such, this was an agonizing win because the stock roller-coastered with no alpha for a long time. We shall go into all the gory details below:
WBD has one of the best content library globally with iconic franchises like Harry Potter, DC Comics, Game of Thrones amongst many other brands (HBO, Discovery, CNN and more).
The company is also a strong free cashflow generator and trading at double digit FCF yield was stable and EBITDA growing. This was our investment thesis.
Its closest competitor, Disney was engaged by activists and we thought US media could become more interesting. WBD was way cheaper than Disney in market cap and hence more interesting.
WBD is also one of John Malone’s Liberty Global companies and his team has a strong track record of strong execution.
We wrote and update on WBD in early 2024. Please see below.
Our Full Roller-Coaster Ride
Background: WBD was formed when Discovery merged with AT&T’s Warner Media c.2022 and was loaded with c.USD66bn of debt. Share price subsequently bobbed up and down violently but ultimately ranged bound from 2022 to 2024.
This was pure pain and agony which we shall describe further below with our powerpoint slide. Fast forward to 2025, WBD then announced to split into two companies earlier this June.
