MSG is fairly valued; the NAV discount has narrowed to ~20% and further upside via re-widening is unlikely.

Uh, I could do MSG. I'm I I'll try to keep it I'll try to keep it brief. Um, I think there's some interesting things to say. Uh, but it's not too too much. So, uh, this was a chart that I I I actually put together uh yesterday.

And so, the way I think about for anybody not familiar with Madison Square Garden Sports, um, it's pretty cool. It's uh one of the few ways that you can um buy ownership into a major professional sports franchise as an individual investor because uh it's publicly traded and it's a holding company and the primary assets are the New York Knicks uh who who just won uh the NBA title uh and then uh the New York Rangers who are you know a pretty historic franchise uh in in the NHL.

Um, so two you know two two prominent franchises uh in two you know two of the four u major sports in in North America um in the biggest market in North America. Uh and and these sports franchises are are very much luxury assets uh or sorry trophy assets um for for wealthy billionaires where uh the actual economics of these businesses is often not that good.

They're not very profitable. Uh it's incredibly expensive to uh to to run these teams and to pay the salaries. And so they're actually not maybe as profitable as you might expect.

Um, we just saw the Lakers, uh, you know, get a there's some legal hiccups, uh, about whether the deal is going to close, but I think there was a 12.5 billion dollar valuation on on the Lakers.

Um, I think the Knicks are considered the second or third most valuable uh, franchise behind the Lakers.

Uh, and so part of uh, there is this tax loophole that makes buying uh, sports franchises a little bit more attractive. um you can amvertise the entire purchase price over um a certain number of years.

Uh and so you get basically a sign a significant tax benefit uh because you can make the income look uh you can make your income look um significantly distorted even though there really would be they're not depreciating assets, right? Like you're these teams are not depreciating.

But so anyways, there's sort of a tax loophole that makes it attractive for billionaires who want to make these big purchases on top of the fact that, you know, it's just really cool to say that you own the Knicks and you can show up to the games and whatever it is.

Uh so when you look at the assets of uh of Madison Square Garden Sports, um I added up the Forb's implied valuation or their estimated valuation for the Knicks and the Rangers and then I just took out the total liabilities to get the implied net asset value for the company.

Um and the big story is is that at different times um there has been a significant gap between the market cap uh valuation of these companies uh of his company um and the Forbes net asset value estimation.

And so, um, Forbes actually, it's sort of another tangent to go on, but, um, I'll just say in short that they have a very good track record of estimating, um, what teams are worth, uh, and that has matched up well for, you know, what they end up selling for at in the future.

Uh, so I have a good bit of conviction in the the Forbes estimations.

Uh and so at one point when we looked at it last year in 2025 um the there was the biggest uh there was a almost a 50% discount um to the net asset value of of the franchises where basically um you know the market cap was was uh what four and a half five billion um and the value of the sports franchises was 10 billion.

So, you're basically um buying the Knicks at a discount and getting the Rangers for free, which is sort of a crazy thing to say.

Uh so, in hindsight, um yeah, I just have to admit like for me, we were this is one of the this was actually the first company we covered on the podcast. Um, I didn't want to set a precedent of of of buying into businesses that didn't have great, you know, underlying operating uh uh metrics where like, you know, there is a speculative component of it of you're you're saying, hey, you know, billionaires are going to keep getting richer and they're going to, you know, bid up the price of of these uh trophy assets more and more and more.

And then there's some tax loopholes that you do that you don't do or don't know whether they'll uh they'll close.

And so anyways, um, in hindsight, being able to have bought, uh, at a 50% discount to Forb's estimated NAV, uh, relative to the market cap of the company, that was, uh, really attractive and and we just missed that. Uh, I was too I was too cautious.

And so today, now that the Knicks uh, have had success, they, you know, won um, you know, they won the NBA uh, finals. Um, now that discount has has closed dramatically. Uh, so there's only a 20% discount roughly.

Uh, and when you think about the friction costs and some of the uncertainties and the fact that, you know, the Forbes estimate isn't exactly isn't 100% precise, that's kind of a rambling way to say that u MSGS is is probably about fairly valued.

Uh, so this is just one that was really interesting. We missed it. Um, I don't know. I I doubt given how good the Knicks are have done recently that we'll get um an opportunity.

You know, there's really a correlation with like the sentiment around how the teams are doing and how wide the discount becomes. Um, and so it's sort of a mean you're you're betting on the the sports franchises to continue to appreciate in value, which at a high level, you know, I'm comfortable with.

Uh and then in last year if we had bought it uh we would have been betting on um a mean reversion in the discount you know and I was thinking about it actually yesterday of whether not buying was a mistake.

Um and the reality is you just don't know when these discounts are going to close and how long it's going to take. So you don't you don't know what you're signing up for and that's not exactly great um great investing practice.

It just so happened that uh you know the Knicks um had an incredible season um and and and went all the way. Uh and so that you know dramatically changed the narrative around the franchises.

Um but if they had had a if the team had tanked, if they'd had a terrible season, um the discount probably would have stayed at 50% for another year. And then now you're betting on um your investment is dependent on the performance of a

Um, we talked about Nike, MSG. So, I don't know. Yeah, I feel good about the rankings.