John Malone: Finding The Greatest Opportunities In The “Ambiguous Middle”The Acquirer's Multiple
In his 2014 Shareholder Letter, Liberty’s John Malone discussed a number of topics including finding opportunities in the ‘ambiguous middle’. Here’s an excerpt from the letter:
Changes in technology and consumer behavior have always had a meaningful impact on our industry. This was true in the 1970’s when John was pioneering the cable industry and more so today due to the ever accelerating pace of technological change. Today’s always-connected, mobile, digital and cloud-based world has a compressed technology roll-out cycle. Formerly stable sectors can transform rapidly, leaving management teams with little time to adjust strategy or reallocate resources. Liberty sees the TMT world in three segments:
1) Clear winners: companies we would love to own, but which are likely at prohibitively high valuations;
2) Clear losers: companies to avoid or monetize before the underlying trend becomes obvious; and
3) Ambiguous middle: this is where the greatest opportunities are likely to lie. A combination of competence, conviction and patience, where Liberty’s house view differs from the market, can allow for highly successful investments.
The market often shoots first and asks questions later. Temporary bouts of market hysteria are common in our industry; sometimes the concerns are unfounded and the business in question is fundamentally sound. As we have done in the past, we will continue to invest based on our long-term vision for how the industry is most likely to evolve, not the proverbial flavor of the week.
While our industry may be too dynamic to adhere to Berkshire Hathaway’s forever holding period, we believe we will be able to find investments where the holding period can be long, technological change notwithstanding. Due to increasing consumption trends, we remain excited about the media industry, and the music industry in particular, as we will discuss in more detail below. Most importantly, we are grateful for your continued trust in us.
You can read the entire letter here:
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