Printed on July eleventh, 2022 by Felix Martinez
Berkshire Hathaway (BRK.B) has an fairness funding portfolio price greater than $360 billion as of the tip of the 2022 first quarter.
Berkshire Hathaway’s portfolio is full of high quality shares. You’ll be able to ‘cheat’ from Warren Buffett shares to seek out picks on your portfolio. That’s as a result of Buffett (and different institutional buyers) are required to periodically present their holdings in a 13F Submitting.
You’ll be able to see all Warren Buffett shares (together with related monetary metrics like dividend yields and price-to-earnings ratios) by clicking on the hyperlink under:
Observe: 13F submitting efficiency is completely different than fund efficiency. See how we calculate 13F submitting efficiency right here.
As of March 31, 2022, Buffett’s Berkshire Hathaway owned simply over 68.9 million shares of Paramount International (PARA) for a complete market worth exceeding $1.67 million. Paramount International at the moment constitutes over 0.5% of Berkshire Hathaway’s funding portfolio.
This text will totally look at Paramount International’s prospects as an funding in the present day.
Enterprise Overview
ViacomCBS Inc., now known as Paramount International, is an American multinational media conglomerate primarily based in New York Metropolis. The company was fashioned by way of the re-merger of CBS Company and Viacom on December 4, 2019, the 2 created from the cut up of the unique Viacom in 2005. The corporate’s content material manufacturers embrace CBS, Showtime Networks, Paramount Photos, Nickelodeon, MTV, Comedy Central, BET, and CBS All Entry.
The corporate has six income segments, the place Promoting, Affiliate, and Content material Licensing are probably the most vital income sources. Paramount is an $18.2 billion market capitalization firm that generated greater than $28.5 billion in income for 2021.
The corporate reported first-quarter outcomes for Fiscal 12 months (FY)2022 on Could 3, 2022. The corporate reported revenues of $7,328 million for the quarter vs. $7,412 million in 1Q21, or a 1% lower year-over-year. This was as a result of TV Media phase seeing a discount in income of 6% year-over-year. The working earnings reported was $775 million for the quarter, a major lower of 49% in comparison with the $1,528 million the corporate reported in 1Q21. The corporate added 6.8 million world streaming subscribers, overwhelmingly led by Paramount+.
PARA has reached over 62 million subscribers within the quarter and achieved 95% year-over-year progress in streaming subscription income. The promoting phase noticed a income enhance of 59% for the quarter. This was attributable to Pluto TV and Paramount+ progress pushed by elevated pricing and impressions on each providers. Non-GAAP EPS of $0.60 was reported, lowering by 61% in comparison with $1.52 per share reported within the first quarter of 2021.
Consensus estimates count on the corporate’s earnings-per-share to be $2.60 for FY2022. This can be a lower of 25.3% in comparison with FY2021. We’ll use the FY2022 estimate of $2.60 for our valuation calculation.
Supply: Investor Presentation
Development Prospects
Over the past decade, Paramount had an earnings compound annual progress fee (CAGR) of three.5% and a destructive 10.0% CAGR over the previous 5 years. With Viacom and CBS’s merger accomplished, the corporate is among the most important content material producers and suppliers globally. This permits Paramount to be in a stable place as content material demand continues to develop.
We estimate a five-year anticipated progress fee of two% as administration continues to combine each firms. The online Margin elevated for FY2021 to fifteen.9%, in comparison with an FY2020 internet margin of 9.6%. The corporate needed to freeze its dividend throughout 2018 getting ready for this merger. Earlier than that, it had a 5-year dividend progress of seven.6%. We anticipated the corporate to begin to develop its dividend at a progress fee of two% over the subsequent 5 years.
Supply: Investor Presentation
one other progress driver could be, after all, the expansion of the corporate Paramount+ subscribers. As you’ll be able to see, the corporate has been rising its subscriber base properly.
Supply: Investor Presentation
Aggressive Benefits & Recession Efficiency
Paramount’s aggressive benefit is its helpful content material, corresponding to those talked about within the Overview part, and being in an important place to be one of many largest producers of recent content material sooner or later. Nonetheless, this firm just isn’t recession resilient as its providers and merchandise are a luxurious. Through the Nice recession of 2008-2009, the corporate’s share value misplaced 83.7%) from peak to trough. The corporate additionally lower its dividend from $1.06 per share to $0.20 per share, an 81.1% dividend lower.
Nonetheless, the present dividend payout ratio is low, at solely 37%, primarily based on FY2022 earnings. Consensus estimates that free money stream (FCF) for FY2022 can be $1.09 per share, which provides a dividend payout ratio of 88.5% primarily based on FCF. The corporate at the moment has a debt-to-equity ratio (D/E) of 0.9, which is sweet. The corporate additionally sports activities a credit standing of BBB.
One other aggressive benefit that the corporate has is its manufacturers of reveals.
Supply: Investor Presentation
Valuation & Anticipated Returns
Over the previous decade, Paramount shares have traded with a mean P/E of 13.2. Nonetheless, over the previous 5 years, it has averaged a P/E of 9.6. Given present headwinds, we’ll use a P/E of 10 for our truthful worth estimate. This represents a (1.1)% draw back as the present P/E of PARA is 10.6 primarily based on the 2022 EPS estimate of $2.60 per share.
One other valuation metric to search for is the corporate dividend yield common historical past. The present dividend yield is 3.8%, in comparison with the corporate 5 12 months common of two.2%. As you’ll be able to see, primarily based on the dividend yield, the corporate appears to be like to be undervalued.
Last Ideas
Paramount gives a low projected complete return. as talked about above, we forecast 4.3% annualized returns for the subsequent 5 years because the reasonable progress and overvaluation make Paramount unattractive at present costs. Thus, we fee PARA as a Maintain.
Different Dividend Lists
Worth investing is a helpful course of to mix with dividend investing. The next lists comprise many extra high-quality dividend shares:
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