Make a Play in This Venue

 | Nov 07, 2011 | 12:00 PM EST
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On Friday, Baron Funds held its annual investment conference in New York. It's an event I've attended a few times, and one that I don't like to miss. In addition to hearing from a handful of CEO's of Baron-owned companies, which this year included Molycorp (MCP), CFR Pharmaceuticals SA, Genesee & Wyoming (GWR) and Pegasystems (PEGA), as well as Baron Fund portfolio managers, founder Ron Baron put his typical glass-is-half-full perspective on the markets.

I may be a deep value guy, but I've long admired Baron, his wisdom and the manner in which he treats his shareholders. Of course, no Baron conference is complete without major entertainment, and this year's guests included James Taylor, Bebe Neuwirth and Hugh Jackman at separate lunch venues, and Sting came in at the end of the conference. Those growth guys know how to put on a first class event!

Entering or leaving the New York via Penn Station, I am still always amazed by the Madison Square Garden property. The Madison Square Garden complex is owned by The Madison Square Garden Company (MSG), which Cablevision Systems (CVC) spun off in early 2010. MSG also owns a whole host of other assets, including the air rights above the Madison Square Garden property, the Chicago Theatre and a 105,000-square-foot training facility in Greenburgh, NY.

The company's sports segment owns the NBA's NY Knicks and the NHL's New York Rangers, which earlier this year were estimated to be worth more than $1.1 billion combined according to Forbes, and represents a significant chunk of MSG's current $1.8 billion enterprise value. Of course, the NBA lockout is a major concern for the company, which weighed on the stock price until recently. It is also unclear whether this will affect the value of the Knicks franchise. It might in the short term but, longer term, I don't believe so.

MSG has recently completed the first phase of a major $850 million renovation project to the Garden, which was closed during the company's first quarter. But now, without a team to play there, MSG has floated the idea of bringing in other live events, an idea that seems a tall order, given the lead times required for scheduling. The company also reportedly assumes that the NBA will resume play in December; if the dispute continues beyond that, however, it will weigh on the stock. It's a great thing to own the team, the arena and a cable network, that is, unless no games are played. While I'm not a huge basketball fan, it's hard to imagine that an entire season would be lost, especially in this economy.

MSG shares popped 4.5% on Friday, following the release of its first-quarter earnings. While revenue fell nearly 7% to $177.6 million, it came in better than the $173.9 million consensus estimate. Meanwhile, net income rose more than 9% to $21.3 million, or $0.28 per share, easily beating than the $0.21 consensus estimate.

It appears to me that the market is currently pricing in the end of the NBA lockout. But, if that does not occur as quickly as expected, there may be an opportunity to pick up some MSG on the cheap.

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