3. Netflix, Inc. (NASDAQ: NFLX)
Number of Hedge Fund Holders: 110
Netflix, Inc. (NASDAQ: NFLX) is a California-based production company that operates a popular video streaming service. It was founded in 1997 and is ranked third on our list of 10 best dating stocks to buy now. The company’s shares have offered investors returns exceeding 12% over the course of the past twelve months. The company is the largest online streaming service in the world with over 200 million subscribers scattered around more than 180 countries around the world. Recently, the phrase ‘Netflix and chill’ has become synonymous with dating as young Americans prefer to stay in and stream a Netflix show instead of going out on a date.
On April 20, Netflix, Inc. (NASDAQ: NFLX) posted earnings results for the first three months of 2021, reporting earnings per share of $3.75, beating market estimates by $0.78. The revenue over the period was more than $7 billion, up 24% year-on-year.
On April 21, news reports suggested that Netflix, Inc. (NASDAQ: NFLX) was planning an expansion into the video game industry and was looking to hire an executive in this regard. The shares of the firm jumped 1% after the report was published.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Netflix, Inc. (NASDAQ: NFLX) with 4.1 million shares worth more than $2.1 billion.
In its Q1 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Netflix, Inc. (NASDAQ: NFLX) was one of them. Here is what the fund said:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
