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Davidson Kempner Capital opens new positions in WWAV, CBS, MCD and sells LBTYK, NVE, FDX—13F Flash B

Smita Nair

Davidson Kempner Capital opens new positions 3Q 2013 (Part 2 of 6)

(Continued from Part 1)

Davidson Kempner Capital Management LLC is an event-driven hedge fund manager led by president Thomas Kempner, Jr., who joined the firm in 1984. The firm was originally founded in May 1983 by Marvin H. Davidson as M.H. Davidson & Co. In 1990, current principals Kempner and Scott Davidson renamed the firm Davidson Kempner Capital Management. It has about $21 billion in assets under management.

Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).

The fund started new positions in Whitewave Foods Co. (WWAV), CBS Corp. (CBS), and McDonald’s Corp. (MCD) and it sold Liberty Global PLC (LBTYK), NV Energy Inc. (NVE), and FedEx Corp (FDX).

Why buy CBS Corp. (CBS)?

In 3Q 2013, CBS reported that revenue grew 11%, to $3.63 billion from $3.27 billion in the same period last year. This was driven by increases in each of the company’s major revenue types. Content licensing and distribution revenues grew 18%, led by domestic licensing revenues from the first-cycle availabilities of the Naval Criminal Investigative Service (NCIS) television show. Advertising revenues increased 4%, driven by the strength of network advertising, which grew 13%. Affiliate and subscription fee revenues rose 23%, principally reflecting the benefit from a Floyd Mayweather pay-per-view boxing event, as well as steady growth from retransmission revenues and fees from CBS Television Network–affiliated television stations. Diluted earnings per share from continuing operations grew 19%, to $0.76. The increase reflected the operating income growth and lower weighted average shares outstanding, a result of the company’s ongoing share repurchase program.

Publishing revenues for 3Q 2013 increased 7%, to $224 million from $210 million for the same period last year. This primarily reflected growth in digital book sales, which increased 39% from the third quarter of 2012. Local Broadcasting revenues for the third quarter of 2013 decreased 3%, to $641 million, due to lower political advertising revenues compared to 2012. This benefited from the U.S. presidential election, and was partially offset by strong growth in retransmission revenues.

On September 30, 2013, CBS completed the sale of its outdoor advertising business in Europe and Asia for $225 million. It expects to launch an IPO of its Outdoor Americas business in 1Q 2014.

CBS expects its television business to drive growth by launching new shows, the success of which will boost not only its base business but also newer revenue streams, including strong growth in retransmission consent fees, reverse compensation, international sales, and all the opportunities arising due to advances in technology. The company is also working on a new advertising model in which it gets paid for additional viewing after a show first airs. It expects half of its revenue to come from non-advertising revenue sources going forward, and to transform itself into a content-centric company. Moreover, deals with Netflix and Amazon will help the company monetize its content. The company announced last month a quarterly dividend of $0.12 per share, payable on January 1, 2014.


Davidson Kempner Capital provides its services to pooled investment vehicles. The firm invests in distressed debt and stocks of companies that are undergoing corporate restructuring, including mergers, spinoffs, liquidations, and recapitalizations. It also uses event-driven strategies, including merger arbitrage, long/short, and convertible arbitrage. The firm employs a fundamental analysis with a bottom-up approach.

Thomas Kempner, Jr., attended Yale University and the Harvard Business School. After graduating, he joined Goldman Sachs in 1978 as a bond trader. After a few years, he left and joined First City Capital. Kempner specializes in risk arbitrage.

Continue to Part 3

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