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Steven Cohen and Point72 Asset Management's 1Q 2014 positions

Part 4
Steven Cohen and Point72 Asset Management's 1Q 2014 positions (Part 4 of 9)

Point72 buys a new stake in Discovery Communications in 1Q14

Point72 Asset Management and Discovery Communications

Point72 Asset Management added new positions in BlackBerry (BBRY), Liberty Global (LBYTK), Estée Lauder Companies (EL), and Discovery Communications (DISCA). The main positions the fund sold include Foster Wheeler (FWLT) and Broadcom (BRCM). The fund’s top position increases include Yahoo (YHOO) and Baidu (BIDU).

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Steven Cohen’s Point72 Asset Management, which was earlier known as SAC Capital, added a position in Discovery Communications (DISCA) in 1Q 2014. The 13F filing revealed that the position accounts for 0.22% of Point72’s 1Q 2014 portfolio.

Discovery Communications is a global media company that provides content across multiple distribution platforms, including digital distribution arrangements, throughout the world. Its global portfolio of networks includes prominent television brands such as Discovery Channel, one of the first nonfiction networks and the most widely distributed global brand, TLC, and Animal Planet. It also has a diversified portfolio of websites and develops and sells curriculum-based education products and services. The company’s operations are classified into three segments: U.S. Networks, consisting principally of domestic television networks and websites, International Networks, consisting primarily of international television networks and websites, and Education, consisting principally of curriculum-based product and service offerings.

U.S. Networks represented 53% while International Networks represented 45% of Discovery’s total consolidated revenues during 2013. In 2013, distribution fees, advertising, and other revenues were 46%, 49%, and 5%, respectively, of consolidated revenues.

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Discovery Communications depends on acquisitions to boost its content pipeline

Discovery Communications (DISCA) and Liberty Global, which are controlled by media mogul John Malone, recently announced a joint venture to acquire All3Media, the largest independent production group in the UK, for $930 million. For the fiscal year ended in August 2013, All3Media recorded revenues of approximately 505 million pounds. News reports said All3Media is the production group behind Hollyoaks, Skins, and other popular UK drama series. This move follows the March acquisition of the London-based independent production house Raw. Discovery said the acquisition is a key step in the strategy to strengthen the company’s creative pipeline, diversify its content creation outside the United States, and formalize an already strong relationship with one of the top production companies in the world. Discovery was also in talks with BSkyB for a joint bid for Richard Desmond’s UK terrestrial broadcaster, Channel 5, which eventually sold to U.S. media group Viacom for $760 million.

Discovery’s revenue growth is driven by International Networks 

Discovery’s 1Q results beat on earnings but missed on revenue. First quarter revenues of $1,411 million increased $255 million, or 22%, over the first quarter a year ago, led by 51% growth at International Networks and 3% growth at U.S. Networks. First quarter net income of $230 million ($0.66 per diluted share) was in line with last year’s net income of $231 million ($0.63 per diluted share). Free cash flow was $213 million for the first quarter, an increase of $108 million or 103% from the first quarter of 2013, primarily due to increased operating performance, lower tax payments, and a decline in losses from derivatives.

In February, Discovery ‘s board approved a $1.5 billion increase to the existing stock repurchase program, taking the total authorization to $5.5 billion.

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