5 Recent Spin-off Companies That Hedge Funds Are Piling Into

1. Warner Bros. Discovery, Inc. (NASDAQ:WBD)

Number of Hedge Fund Holders: 61

Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a New York-based media company that produces, develops, and distributes feature films, television, gaming, and other content through basic networks, direct-to-consumer channels, and games licensing. The company was formed after the spinoff of WarnerMedia by AT&T Inc. (NYSE:T), and its merger with Discovery, Inc. on April 8. It is one of the spinoff stocks that hedge funds are picking up.

On January 24, Atlantic Equities analyst Hamilton Faber reiterated an Overweight rating on Warner Bros. Discovery, Inc. (NASDAQ:WBD), stating that a merger between the two direct-to-consumer services, HBO Max and Discovery+, could result in revenue neutrality. The firm’s analysis suggests that there is 80% potential for growth in shares of Warner Bros. Discovery, Inc. (NASDAQ:WBD) from current levels, despite the expected loss of 4 million subscribers who currently use both services and 40% of Discovery+ subscribers potentially being unwilling to pay a higher monthly fee. The analyst argues that the increase in average revenue per user for Discovery+ can offset these losses and make the merger revenue neutral. He maintained a $22 target price on Warner Bros. Discovery, Inc. (NASDAQ:WBD) shares. 

According to Insider Monkey’s data, 61 hedge funds were long Warner Bros. Discovery, Inc. (NASDAQ:WBD) at the end of September 2022, compared to 68 in the prior quarter. 

O’keefe Stevens Advisory made the following comment about Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its Q4 2022 investor letter:

“Several positions within the portfolio deserve some reflection; however, the one deserving the most attention is Warner Bros. Discovery, Inc. (NASDAQ:WBD). Not surprisingly, it was one of the worst-performing stocks in our portfolio over the past year.

Warner Brothers Discovery (WBD) – One concept learned from Jeremy Raper at Raper Capital (@Puppyeh1 on Twitter) is “when there’s a massive pivot in biz model and under-delivery vs. clear IPO targets, it’s generally a big red flag.” While WBD is not a recent IPO, it went through a dramatic business model change. I recall two examples of companies that pivoted strategies…” (Click here to read the full text)

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