Why Netflix (NFLX) Is A Compelling Investment Case
If you are looking for the best ideas for your portfolio you may want to consider some of Ensemble Capital's top stock picks. Ensemble Capital, an investment management firm, is bullish on Netflix Inc (NASDAQ:NFLX) stock. In its Q4 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Netflix Inc (NASDAQ:NFLX) stock. Netflix Inc (NASDAQ:NFLX) is a media-services provider and production company based in California. The stock is up 19% since the Ensemble Capital's pitch in January 2020, which suggests the investment firm was right in its decision. On a year-to-date basis, Netflix Inc (NASDAQ:NFLX) stock has risen by 48%.
On January 22, 2020, Ensemble Capital had released its Q4 2019 Investor Letter. The investment firm is bullish on Netflix Inc (NASDAQ:NFLX) because Walt Disney Co's (NYSE:DIS) Disney Plus service is not a substitute but a complement to Netflix.
For the quarter ended December 31st, 2019, Ensemble Fund recorded a return of 9.87%, compared to 9.07% of the S&P 500 Index. This brings its 2019 full-year return to 39.55%, compared to 31.49% of the S&P 500 Index.
Let’s take a look at comments made by Ensemble Capital about Netflix Inc (NASDAQ:NFLX) in the letter.
"Netflix, which returned almost exactly 0% during the first three quarters of the year, shot higher by 21% this past quarter. In the face of Disney Plus rolling out and landing 10 million subscribers on its first day, we’ve stayed bullish on Netflix as we believe that a Disney Plus subscription is a complement to, not substitute for, a Netflix subscription. While data on this question is scarce and preliminary at this point, Netflix has rallied as early indications appear to support our thesis. For instance, a survey from research firm Cowen & Company suggested that 80% of all Disney Plus subscribers report also maintaining a Netflix subscription and only 5% of Disney Plus subscribers report having canceled Netflix."
In Q1 2020, the number of bullish hedge fund positions on Netflix Inc (NASDAQ:NFLX) stock decreased by about 5% from the previous quarter (see the chart here), so a number of other hedge fund managers don't seem to agree with Netflix's growth potential. Our calculations showed that Netflix Inc (NASDAQ:NFLX) is ranked #16 among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
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Disclosure: None. This article is originally published at Insider Monkey.
