Bidding War Sparks Rally for Warner Bros. Discovery, Value Fund Sees Opportunity
As major indices continue their historic climb, investors are increasingly scrutinizing pockets of value. The S&P 500 capped off 2025 with a 17.9% annual gain, a remarkable run that has seen the benchmark grow tenfold since the depths of the 2008 financial crisis. However, concentration risk in a handful of mega-cap tech stocks has left many wary of stretched valuations. Against this backdrop, the Hotchkis & Wiley Large Cap Disciplined Value Fund is finding opportunities in names like Warner Bros. Discovery (NASDAQ: WBD), which it cited as a leading performer in its Q4 2025 investor letter.
The fund's managers noted that while the "Magnificent 7" tech giants have dominated headlines, the broader market's forward price-to-earnings ratio, excluding these behemoths, aligns with historical averages. This has created a fertile hunting ground for disciplined value investors. "In an environment where selectivity is paramount, we believe certain companies in the media and software sectors present compelling risk-reward profiles," the letter stated.
Warner Bros. Discovery emerged as a standout. The global media conglomerate saw its shares close at $27.60 on January 29, 2026, giving it a market cap of approximately $68.4 billion. More strikingly, its stock gained an eye-popping 164.37% over the preceding 52 weeks. This surge, the fund suggests, was fueled not just by operational improvements but by intensifying speculation of a potential acquisition. Multiple industry players are reportedly circling, sparking a bidding war that has reignited investor interest in the often-overlooked sector.
"WBD's asset portfolio—spanning iconic film studios, cable networks, and the Max streaming platform—is uniquely positioned," the fund's analysis continued. "While near-term challenges in linear TV persist, the market is beginning to price in the strategic value of its content library and direct-to-consumer platform in a consolidating industry." According to Insider Monkey data, hedge fund interest ticked up slightly, with 70 funds holding WBD at the end of Q3 2025, up from 67 the prior quarter.
The fund's commentary, however, struck a balanced tone. It acknowledged that while WBD presents significant potential, the firm sees even greater upside in select, undervalued AI stocks that also benefit from shifting trade policies. This reflects a broader debate on where the next wave of value will emerge as the market cycle matures.
Market Voices: A Split Screen on Media Stocks
David Chen, Portfolio Manager at Sterling Advisors: "This is a classic value play finally getting its due. The market was pricing WBD for obsolescence, ignoring the enduring cash flow of its studios and the turnaround potential in streaming. A bidding war validates the intrinsic value we've long seen."
Rebecca Vance, Media Analyst at ClearSight Research: "The rally is exciting, but let's be clear: it's driven by M&A speculation, not fundamentals. The core business is still grappling with massive debt and secular decline. This feels more like a trader's game than an investor's thesis."
Marcus Thorne, Independent Investor: "It's about time! The sheer panic selling after the merger created a generational low. These assets are crown jewels. Anyone who didn't see this coming wasn't looking at the balance sheet—just the headlines."
Anya Petrova, Editor at The Capital Digest: "The frenzy overlooks the real story. Whether WBD is acquired or not, this surge forces a re-rating of legacy media assets. It signals that in the age of streaming, content aggregation and scale are becoming survival necessities, making every major player a potential target."
Disclosure: This analysis is based on publicly available documents and commentary. It is not investment advice. For further insights, review the fund's top holdings and other Q4 2025 investor letters.