The largest contributors to Q3 returns were long-term holdings Telephone & Data Systems (TDS, Financial) (0.9% average weighting, +131%) and its 83%-owned regional wireless operator UScellular (1.1%, +142%). In August TDS announced it would commence an open-ended strategic review of UScellular which we believe could include everything from sale of the whole company or its pieces to a consolidation into TDS. Sphere Entertainment (SPHR, Financial) (1.5%, +30%), a new holding separated in April 2023 from MSG Entertainment (MSGE, Financial) (1.4%), opened its Las Vegas venueâthe largest spherical building and LED display in the worldâto great fanfare. Finally, Telesat Corp. (TSAT, Financial) (0.4%, +53%) rose sharply after announcing a change in prime contractor and advancements in technology would allow it to deploy its planned Low Earth Orbit (LEO) constellation for $3.5 billion vs prior $5.5 billion, eliminating the need for outside equity funding. After many quarters of strong results and performance, American Express Co. (AXP, Financial) (5.4%, -14%) was the largest Q3 detractor as fears of a slowdown in consumer spending and a deterioration in consumer credit impacted the stock. Media companies Grupo Televisa (TV, Financial) (1.1%, -41%) and Paramount Global (PARA, Financial) (3.9%, -15%) declined due to a combination of concerns including an acceleration of linear cord cutting, a deceleration of direct-to-consumer growth, labor disputes and cyclical advertising weakness.
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Atlanta Braves Holding (BATRA, Financial) (2.8% of net assets as of September 30, 2023) primary assets are the Atlanta Braves baseball club and the mixed-use real estate development known as âThe Batteryâ surrounding Truist Park. The Braves, founded in 1871, are the oldest continuously operating professional sports franchise in the U.S. with fans across the Southeastern U.S. The team has recently reclaimed much of its prior success and are reigning 2021 World Champions. Long term, team values should be supported by growing media revenue and the growth of recently legalized sports betting. Liberty took an important step toward monetizing the value of the team in July 2023 when it splitoff the Braves as an asset-backed company, facilitating an eventual sale.
American Express Co. (AXP, Financial) (5.4%) is the largest closed loop credit card company in the world. The company operates its eponymous premiere branded payment network and lends to its largely affluent customer base. As of Sept 30, American Express has 138 million cards in force and nearly $118 billion in loans. The company's strong consumer brand has allowed American Express to enter the deposit gathering market as an alternate source of funding, while the company's affluent customers have picked up spending. Longer term, American Express should capitalize on its higher spending customer base, especially with Millennials, and continue to expand into other payment related businesses, such as corporate purchasing, while also growing in emerging markets. Similarly, the company is looking at the growing success of social media as an opportunity to expand its product base and payment options.
National Fuel Gas Company (NFG, Financial) (3.6%), based in Williamsville, New York, is a gas and pipeline utility with a growing exploration and production business. The gas utility serves 753,000 customers in Buffalo, New York, and Erie and Sharon, Pennsylvania. The pipeline & storage (P&S) business operates 3,000 miles of pipe and 34 storage facilities, primarily in the state of New York. The E&P business, Seneca Resources, operates in Appalachia (owns 1.2 million net acres), primarily the Marcellus and Utica shales. Seneca's proved gas reserves at year-end FY 2022 were 4,172 Bcfe (compared to 3,853 Bcfe in FY 2021). S&P rates NFG's unsecured credit âBBB-â stable. Higher long-term gas prices increase the potential for the significant value of the 1.2 million net Marcellus/ Utica acreage to be realized. While forward prices have declined, they remain elevated (+$4.50 in 2024-2025) compared with two years ago. The company continues to transition to a maintenance/low growth mode to operate within cash flows and improve credit profile. NFG raised the annual dividend for the 53rd consecutive year to $1.98 per share from $1.90 per share.
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