Billionaire Steve Cohen Tops Warren Buffett In Starz

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Billionaire investor and founder of SAC Capital, Steve Cohen, has topped fellow billionaire Warren Buffett as one of Starz (NASDAQ: STRZA)'s biggest fund owners. Cohen has disclosed a 2,000% increase from the number of Starz shares he owned at the end of the third quarter, going from only owning 286,927 to over 6.3 million shares, or 5.7% of the company. At the end of the third quarter Buffett only owned 5.5 million (check out Cohen's profile and holdings here). 

Earlier this year billionaire Ken Griffin of Citadel Investment Group joined Steve Cohen as an investor in TiVo, and now the two have another TV-related stock in common, Starz. Both stocks have been speculated at potential takeover targets (read more about Cohen and Griffin's TiVo investment)

Of the premium content providers, there is Starz, HBO -- owned by Time Warner Cable (NYSE: TWC) and Showtime -- owned by CBS (NYSE: CBS), both of which could be potential buyers of the newly spun-off Starz. Another potential suitor could be Comcast (NASDAQ: CMCSA). The Comcast-NBC giant could use Starz to add a premium network to its portfolio. The takeover is especially compelling when you look at how the enterprise value of how the other companies stack up to Starz:

<table> <tbody> <tr> <td><strong>$ in billions</strong></td> <td><strong>Starz</strong></td> <td><strong>CBS</strong></td> <td><strong>Time Warner</strong></td> <td><strong>Comcast</strong></td> </tr> <tr> <td>Enterprise Value </td> <td> $1.69</td> <td> $25.38</td> <td> $49.14</td> <td> $85.53</td> </tr> </tbody> </table>
 Earlier this year Liberty Media (NASDAQ: LMCA) spun-off Starz, and since then Starz has traded relatively flat, up around 2.2%. The premise behind the spin-off was to relieve the pressure on Starz's valuation multiples, where Liberty believed that the Starz segment was being unfairly discounted by being held under the Liberty Media umbrella (read more about whether Starz is a good buy). 

Things have not panned out as planned so far, and multiple pressure still exists, where Starz still trades at a hefty discount to peers: 

<table> <tbody> <tr> <td> </td> <td><strong>Starz</strong></td> <td><strong>CBS</strong></td> <td><strong>Time Warner</strong></td> <td><strong>Comcast</strong></td> </tr> <tr> <td><strong>Price to Earnings</strong></td> <td>1.2</td> <td>18.1</td> <td>19.1</td> <td>17.4</td> </tr> <tr> <td><strong>Price to Sales</strong></td> <td>0.7</td> <td>1.8</td> <td>1.6</td> <td>1.7</td> </tr> </tbody> </table>
Crowded is good. SAC Capital is not the only hedge betting on Starz, one of the top performing funds in 2012 has over 15% of its 13F portfolio invested in the company (read more about the hedge fund). Cohen's investment in Cohen also comes only days after Gates Capital announced a 5.9 million stake in the company. Worth noting is that billionaire John Malone, Chairman of Liberty Media, owns 11.2 million shares per a January 13D filing. Other top hedge funds owning Starz includes Jana Partners, D.E. Shaw and David Einhorn of Greenlight Capital (check out details on Greenlight's partner letter). Although a crowd can generally be a bad thing, that is not the case with Starz. I believe the more the merrier, as these hedge funds and billionaire investors will strive to unlock the most shareholder value for investors, including the possibility of an acquisition (check out all the hedge funds owning Starz).

 Over the interim, the company should be able to able to see price appreciation as investors realize Starz's depressed valuation, especially with billionaire investors taking notice. Beyond that, there is the potential for a takeover. Eugene Huang of Artemis Capital had this to say about the likelihood of Starz being acquired...

Starz will be the only standalone premium pay TV channel. HBO is owned by Time Warner, and Showtime by CBS. It doesn't make any sense to stand alone on its own. Starz could easily be acquired by Disney or Sony, News Corp, Viacom, Time Warner, CBS, or Comcast/NBC. DirecTV previously tried to acquire Starz in 2009 but couldn't agree on a valuation. Management has already indicated that this is a possibility already being explored. 


mhargra has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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