Source: World Wresting Entertainment.
We should never blindly copy any investor's moves, no matter
how famous, talented, or successful the investor. Still, it can
be useful to keep an eye on what smart folks are doing. 13F forms
can be great places to find
intriguing candidates for our portfolios
For example, a glance at the latest quarterly 13F filing of
Citadel Advisors shows that it closed out its position in
World Wrestling Entertainment
, selling some 772,000 shares that would be worth more than $11
Why pay attention to Citadel Advisors?
Founded and managed by Kenneth Griffin, Citadel Advisors is
one of the biggest hedge fund companies around, with a reportable
stock portfolio totaling $74 billion in value as of June 30.
According to the folks at InsiderMonkey, Griffin and his
team use "a combination of advanced computer code, complicated
financial algorithms and secrecy. Griffin was using quantitative,
technology-based methods before many other firms had cell
Why sell World Wrestling Entertainment?
Why would the folks at Citadel, not to mention any other
investor, sell World Wrestling Entertainment? Let's review a few
reasons, starting with the dividend. Yes, it yields an appealing
3.6%, but the payout is $0.48 per share annually -- more
than the company's earnings per share in 2011, 2012, and 2013 --
and its trailing 12-month earnings are in the red. The dividend
is also a third of what it was in 2011, reminding us that these
payouts do get reduced or eliminated.
Then there's World Wrestling Entertainment's business itself.
These are days of rapid changes in how entertainment is
delivered. Many people are dropping cable and relying on
streaming services, for example. World Wrestling's pay-per-view
service was struggling, so the company developed its own
streaming service, a network it could sell directly to consumers,
bypassing the cable middlemen and asking for $10 per month for
access to all its programming. That wasn't such a crazy idea, but
things have not worked out well for the company lately: After
claiming 667,287 subscribers in its first 42 days, the
service only netted about 33,000 more in the following three
months, which ended July 31. Even worse, the churn rate was
terrible, with many subscribers
going out of their way to cancel
The company's valuation is also a concern, with its recent P/E
ratio suffering from net losses, its forward P/E near 23, and its
price-to-sales ratio of 2.1 slightly above its five-year average
of an even two. Believers see this as an
attractive entry point
, but the stock doesn't seem to be at screaming-bargain level
World Wrestling Entertainment has addressed some of its
problems by slashing its workforce by about 7%. That can be good
if a company is trimming fat, but this is being done in a more
desperate environment, and at those times, muscle and bone can
get cut, reducing performance potential.
Why buy World Wrestling Entertainment?
It's hard to come up with many reasons to invest in this company,
given the rough patch it's going through now. It does have great
international expansion plans
, which could serve it well -- but many international viewers
will be expected to watch programming in a language they don't
It has a strong brand and many loyal fans and potential
customers, too. With its business model, WWE's
profitability can increase
substantially if it can bring in more subscribers and boost
retention of those viewers. Some see its
goal of 1.3 million subscribers
(or more) by the end of this year as achievable, and they like
agreements, too, for its show
on the USA Network and
on SyFy. Bulls note that streaming-video company
started small as well.
The 3.6% dividend yield is attractive, but the company has
reduced its payout before and may well do so again.
The bottom line here is that you can find great potential and
far less risk in other stocks. If you own shares, you might want
to join Citadel Advisors and sell -- or at least watch carefully
for signs of further deterioration (or success, which
possible). With some more promising numbers for its streaming
service, this company will look a lot more attractive.
Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to
profit? There's $2.2 trillion out there to be had.
Currently, cable grabs a big piece of it. That won't last. And
when cable falters, three companies are poised to benefit.
for their names. Hint: They're not Netflix, Google, and
This $74 Billion Hedge Fund Sold World Wrestling
Entertainment Inc. Should You?
originally appeared on Fool.com.
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