ASB Partners Q124 Letter
Letter sent to LPs summarizing the performance of ASB Partners for Q124 with a discussion of selected positions $MSGE,$LRN,$OSW...Please see the risk disclosures.
April 15th, 2024
Dear Limited Partner,
For the quarter and Year to Date ending 3/31/2024, ASB Partners’ unaudited net results were +3.6%. The following tables summarize various concentration and performance metrics.
Selected Portfolio Discussion
Madison Square Garden Entertainment (MSGE) –
MSGE reported earnings on February 7, 2024, and I gave a more detailed update here. Regarding the setup in the stock, I’m reminded of something Seth Klarman once remarked: “Complexity is the friend of the value investor.” As can be seen from the chart above, MSGE has only been trading as a standalone entity since April of 2023, when it split from Sphere Entertainment/Madison Square Garden Network. The market has not seen “clean financials” from MSGE for 2 reasons: 1) Cash flows from MSGE were used to fund the construction of the Sphere (a $2.6 billion project); 2)New York City was one of the last places to fully return to normal after Covid which weighed on the live entertainment business. As the market continues to digest the implications of an iconic asset growing its cash flow by a low double-digit percentage, the bet is that the strong performance will continue.
Stride Inc (LRN)
LRN is relatively flat YTD despite reporting strong results in January. Perhaps what was most interesting and potentially missed by the market was the accelerating growth in enrollments at the end of the December quarter (FYQ2).
LRN reported that the average enrollment for the quarter was 193,100:
CEO James Ryu also noted that they ended the quarter with 196,500 students, or 3,400 more than the average for the entire quarter:
This might look like hairsplitting, but it’s important in the overall history of the company. By way of background, Stride enrolls its students based on the academic calendar, so their census is relatively fixed in September when the school year starts. Pre-pandemic, the normal cadence of the business was to experience a certain rate of attrition during the school year, usually from students who decide that they want to return to a brick-and-mortar school. However, since Covid, the company has been able to actually grow its enrolments in the first part of the school year, which speaks to overall demand and tailwinds for School From Home. The fact that the ending census was higher than the average census indicates that this trend is still happening.
More importantly, Stride trades around ~$60/share relative to ~$4/share in projected Adj. EPS for FY24 or about 15x which means there has been very modest multiple expansion despite better current and future growth. It’s worth repeating that the company has guided to an FY28 EPS range of $6-8/share:
The last time the company gave multi-year guidance, it exceeded its estimate in timing, revenue, and EPS.
OneSpaWorld (OSW) –
I presented a more detailed analysis of OSW in the ASB Partners Q423 Letter
In March, Steiner Leisure, who was initially involved in a strategic investment, entirely divested their holdings by selling their remaining shares on March 13, 2024:
It’s impossible to know “what the market was/is thinking,” but it’s possible, given the removal of this overhang along with strong trends in the industry, that OSW is poised for further strength:
I appreciate your support. Please let me know if you have any questions.
Sincerely,
Adam Buckstein
Managing Member
646-353-8314
really well done as usual