Discovery Communications (NASDAQ:DISCA) has been one Northlake's best performing stocks. The stock was purchased in mid-September prior to the market crash at $16.50. Today, I trimmed the position across most client accounts at $17.83.
It's pretty amazing that any stock, let alone a media stock, is above its pre-crash level. With most all other holdings down sharply since the DISCA purchase, the position size had swelled to north of 4% in many accounts. Obviously, I still like DISCA as I did not sell the entire position. However, I still see the market and advertising environment as fragile so I want to avoid concentrated positions.
DISCA has less margin for error due to its well-earned premium multiple of earnings and cash flow. 1Q earnings are due later this month and I do not think there will be a disappointment. The last two quarters were positive surprises. The key metric will be domestic advertising advertising growth. Expectations are for flat growth (that is excellent compared to -5% to -10% for most media companies).
Here's hoping that my sale proves wrong, so Northlake clients make more money on their remaining DISCA positions.
Disclosure: Long DISCA in client holdings